Thai Experience on Energy Taxation

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1 The 5 th IMF-Japan High-Level Tax Conference for Asian Countries Thai Experience on Energy Taxation Dr. Warotai Kosolpisitkul Director of Tax Policy Bureau Fiscal Policy Office, Ministry of Finance 21 April

2 Outline Energy and Petroleum Consumption Energy-related Fiscal Instruments: o Petroleum Income Tax o Oil Fund o Energy Conservation (ENCON) Fund o Excise Tax on Petroleum Products o VAT o New Excise Tax on Automobile 2

3 Share of Energy Consumption in Thailand Coal and Its Products 7.7% Natural Gas 7.1% Renewable Energy 7.9% LPG 7.6% Gasoline 7.2% Petroleum Product 47.8% Diesel 21.6% Fuel Oil 5.4% Traditional Renewable Energy 10.7% Electricity 18.8% Source: Ministry of Energy, Thailand Note: Data in 2013 Kerosene 0.6% Aviation Fuel 5.4% 3

4 Petroleum Fiscal Regime Thailand : Concessionary System Billion (Baht) Government Take Petroleum Income Tax Petroleum Royalties Special Remuneratory Benefit : SRB

5 Oil Price Structure in Thailand Ex-Refinery Price (AVG) Excise Tax Municipality Tax Oil Fund Energy Conservation Fund Wholesale Price Wholesale Price VAT on Wholesale Price Marketing Margin VAT on Marketing Margin Retail Price Sample of Price Structure (April 9, 2014) UNIT:BAHT/LITRE EX-REFIN. Excise TAX Municipality TAX OIL CONSV. WHOLESALE VAT WS&VAT MARKETING VAT RETAIL (AVG) B./LITRE B./LITRE FUND FUND PRICE(WS) MARGIN ULG GASOHOL95 E GASOHOL GASOHOL95 E GASOHOL95 E H-DIESEL

6 Oil Fund Established in March 1979 Earmarked Fund as an Oil Price Stabilizing Instrument Rate Stipulated by Energy Policy Management Committee 6

7 Balance of Oil Fund and Crude Oil Price Million Baht 30,000 25,000 20,000 15,000 10,000 5, ,000-10,000-15,000-20, Balance of Oil Fund (Left Axis) Dubai Crude Oil Price (Right Axis) USD per Barrel Source: Ministry of Energy, Thailand Note: Data is collected at the end of each year. 7

8 Energy Conservation Fund (ENCON Fund) Feature Earmarked fund to finance the government sponsored energy conservation projects Objective supporting energy efficiency (EE) and renewable energy (RE) development Source Government levies collected by the government on petroleum products. Allocation Providing working capital, grants and subsidies for investment in energy conservation programs 8

9 The Implementation of the ENCON Fund Levies from Petroleum Product ENCON FUND (THB 7 Million or approx. USD 200,000 Annually) 2/3 of Fund 1/3 of Fund Energy Planning and Policy Office Department of Alternative Energy Development and Efficiency Grants for relevant stakeholders Demand side Management Bidding: provides subsidies through bidding mechanism to encourage business operators to invest in higher energy efficiency machines/equipment. Energy Efficiency Revolving Fund (EERF) Energy Service Company (ESCO) Fund 9

10 Excise Tax Rate on Petroleum Products Categories Ceiling Rate Effective Rate Ad Valorem (%) Specific Ad Valorem (%) Specific 1.1 Gasoline (1) Unleaded gasoline baht/litre baht/litre (2) Other gasoline baht/litre baht/litre (3) Gasohol with ethanol content not less than 10% baht/litre baht/litre (4) Gasohol with ethanol content not less than 20% baht/litre baht/litre (5) Gasohol with ethanol content not less than 85% baht/litre baht/litre 1.2 Kerosene 34 4 baht/litre baht/litre 1.3 Fuel for jet aircraft (1) used directly in jet aircraft 34 4 baht/litre baht/litre (2) used for others 34 4 baht/litre baht/litre 1.4 Diesel (1) with sulphur content over 0.035% baht/litre baht/litre (2) with sulphur content not over 0.035% baht/litre baht/litre (temporary reduced) (3) sold in the connecting territory area baht/litre - exempt (4) filled in the connecting territory and remaining in the regular tank of the registered fishery vessel baht/litre - exempt (5) with Methy-ester of fatty acid not less than 4% (Biodiesel) baht/litre baht/litre (temporary reduced) 1.5 Natural Gas Liquid (NGL) 42 5 baht/litre baht/litre 1.6 Liquefied Petroleum Gas (LPG) 34 9 baht/kg baht/litre 1.7 Fuel Oil Bitumen Product Hydrocarbon Solvent

11 New Excise Tax on Automobile Excise tax based on carbon dioxide emissions (CO2) standard Will be effective on 1 Jan Eco-car segment enjoying 3-percent reduction in excise tax 11

12 In summary Major characteristics of energy taxation in Thailand are: Government revenue generation Oil price stabilizing instrument Mixed use of tax and earmarked fund Discouragement of negative externality (to create environmental-friendly economy) 12

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