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Import duties on luxury items to be scrapped in order to attract tourists from China

In order to attract wealthy travelers from markets such as China the Thai government had decided to scrap import duties on clothes, cosmetics and luxury watches.  Some of the duty on luxury goods will be slashed to zero from thirty percent by the end of the year.

The government is expecting tourist arrivals to surge 18% and reach 26.4 million this year, and that will help counter the slump in exports and domestic consumption that has seen the economy grow as little as 3.8%.

Somchai Sujjapongse, head of the finance ministry said “we will do it fast because we went to help boost the economy this year”, apart from buying luxury products they will also buy our local products, we also hope that wealthy Thai people will buy luxury items in Thailand instead of flying to Europe to make purcheses”.

According to government data Thailand’s tourist arrivals increased 16% to 22.4 million last year, the number  of visitors from China surged by 62 percent to 2.8 million. According to the China Tourism Academy Chinese tourists who spent $105 billion overseas in 2012, are forecast to make 94 million trips this year, almost double the level in 2009.

Singapore attracted 14.4 million visitors last year, according to preliminary government figures. Arrivals from China increased 23 percent to 1.5 million in the first nine months of last year, according to the most recent data. The Singapore government expects arrivals to increase to as many as 15.5 million this year.

“We can easily compete with Hong Kong and Singapore,” Tos Chirathivat, chief executive officer of Central Retail Corp., said today in an interview. “Our infrastructure, our malls are the same or better. We have more. The service is good. The rental cost is lower and labor cost is lower.”

Thailand will initially cut import duties on some luxury goods to between zero and 5 percent, from 30 percent, said Somchai from the finance ministry. The government will discuss the plan with local retailers to ensure they aren’t adversely affected by the measure, he said.

“We may lose some revenue from the tax cut, but I don’t think it will be a lot,” Somchai said. “We will in turn get more from VAT and other taxes.” Thailand levies a value-added tax of 7 percent on goods and services, the same level as Singapore’s goods and services tax.

Deputy Finance Minister Benja Louichareon said today that the ministry is concerned the tax cut will hurt local producers, so must be carefully considered.

“We need to see figures from the revenue department on how much is the VAT refund from tourists buying products in Thailand,” she told reporters. “If it’s a lot already, there is no need to do additional measures.”

Somchai said visitors from China were a key target of the plan to lower import duties.

“Thailand sits right in the middle,” said Tos of Central Retail. “If we look at India, China, Hong Hong, Singapore, whatever, within three-to-six hours flight, people can come easily for the weekend.”

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