Thailand is preparing to join the league of countries implementing a carbon tax. Ekniti Nitithanprapas, the Director of the Excise Department at the Ministry of Finance, revealed that the department has been collaborating with both domestic and international organizations to draft carbon tax regulations. The data collection process is expected to be completed by the end of this year (2024).
The Excise Department is referencing the World Bank's "Carbon Tax Guide: Handbook for Policy Makers" as a foundation for formulating relevant regulations. The guide's five major categories are being followed to structure the rules of the carbon tax:
- Tax Base: The tax base can be divided into two different types. The first follows the Singaporean model, where factories emitting greenhouse gases during the production process are taxed. The second follows the Japanese model, levying taxes based on the classification of petrochemical products. However, according to the 2017 Goods Tax Act, taxes can only be imposed on goods. Therefore, upstream manufacturers may be taxed for refineries, midstream manufacturers for power plants using fossil fuels, and downstream manufacturers for goods with higher greenhouse gas emissions.
- Tax Rate: The current carbon tax prices vary widely, ranging from $1 to $130 USD, depending on the specific circumstances in each country.
- Revenue Use: Addressing environmental issues may impact the livelihoods of certain vulnerable groups, as imposing a carbon tax can raise the cost of living. The government needs to plan budgets for compensation.
- Institutions: There should be a specific authority responsible for conducting inventories, confirming greenhouse gas emission rates, and managing tax revenue.
- Avoid Undesirable Effects: This involves avoiding negative impacts such as double taxation and ensuring tax fairness among taxpayers or sectors. Additionally, future adjustments in carbon pricing measures between countries should be considered, such as the European Union's Carbon Border Adjustment Mechanism (CBAM), which offsets carbon fees based on the carbon tax paid at the product's place of origin.
The World Bank also emphasizes that the primary goal of imposing a carbon tax is to raise environmental awareness. Therefore, the tax rate must be incrementally increased. For instance, Singapore starts with a levy of 5 Singapore dollars (about $3.76 USD) per ton of carbon dioxide equivalent, gradually increasing it every two years.
Furthermore, implementing a carbon tax in Thailand can prevent tax revenues from flowing into other countries, achieving the effect of revenue recycling, and providing funds for activities aimed at reducing greenhouse gas emissions elsewhere.
In order to achieve net-zero carbon emissions by 2050, the Thai government is actively promoting environmental protection and a green economy. This includes the EASE Excise policy, where the initial letter "E" focuses on environmental protection, social responsibility, corporate governance (ESG), as well as sustainable strategies related to bio, circular, and green economy (Bio-Circular-Green, BCG). It is anticipated that four related tax measures will be introduced this year as part of this initiative.