Cabinet considers online tax

Thailand is considering a draft bill on taxing e-commerce companies and social-media networks.

To ensure the law will be enforced under the current government, the bill goes before cabinet this month, says the Bangkok Post.

Under the bill, financial institutions, which now act as money-transfer intermediaries, will be required to withhold tax at a rate of 5 per cent for any online purchases and advertising fees on social-media networks, says Revenue Department director-general Prasong Poontaneat.

The draft bill proposes that the Revenue Department tax online transactions; advertising fees on social media such as Facebook, Google and Line; and activity by app-based companies such as ride-sharing service Uber.

This means that money changing hands for online purchases of goods and services, advertising on social networking, Uber transactions, and transfers by senders or recipients in Thailand will have the 5 per cent withholding tax imposed.

Although companies may not be based in Thailand, under the new law they would be liable to pay tax like Thai traders, says Prasong, who estimates the value of online purchases at trillions of baht.

Subject to VAT

He says Uber is not a transport service provider, which are exempt from consumption tax, but rather a business that charges fees from a managing system, making it subject to value-added

tax (VAT).

For every THB100 (US$2.95) passengers pay to Uber drivers, the driver receives 80 baht and the balance goes to Uber, which, says Prasong, has never paid tax to the Thai government. The Revenue Department estimates that Uber earns THB2 billion a year.

Thai E-commerce Association president Pawoot Pongvitayapanu says the new tax policy could slow the growth of e-commerce in Thailand, in particular for small individual merchants who sell through social media.

Acknowledging that tax collection for online merchants would make competition more fair for those who pay tax correctly, he says the government should prepare a system to support small online merchants, including the use of e-receipts, with tax-collection details sent to the government automatically. Such a process has been introduced in South Korea.

He says the tax process could otherwise become a burden to small business.

A study by the Electronic Transactions Development Agency found that wholesale and retail sales through social commerce in Thailand last year were worth THB269 billion, surpassing the THB57 billion of e-marketplaces and THB17.5 billion through independent websites/applications, says Pawoot.

Facebook and Instagram are the two main channels for social commerce. Thais sell through Facebook pages, Facebook groups and Facebook Live, while more than 850,000 online merchants use Instagram.

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