Difficult start for the decrease in the price of wine and other alcohols in Thailand

As the alcohol tax reform in Thailand came into effect at the beginning of this month, some issues have slowed its implementation.

Updated on July 18, 2024: according to a foreign restaurateur based in Thailand who orders his wine from a small supplier, the price of bottles of wine has effectively fallen by around 10% depending on the brand.

Large suppliers, such as supermarkets, may take longer to pass on the reduction, as they must first clear their stocks.

Thailand has decided to reduce its prohibitive taxes on alcohol.

The tax changes were announced earlier this year and came into effect on March 1st.

See: Thailand reduces taxes on wines and other alcohols

The government has proposed a three-tier reduction in alcohol taxes.

First, the 54% import duty will be reduced to 0%.

Secondly, the excise tax will be reduced from 10% to 5%.

Another excise tax, which applies to the volume and percentage of alcohol and was calculated at 1,500 Bahts (38.51 euros) per liter for every 100 degrees of alcohol content, will now be reduced to 1,000 Bahts (25.67 euros).

Christophe Imbert of Comte de Sibour Ltd, a wine distribution company heavily focused on retail, confirmed that excise reductions are fully confirmed and import reductions will be applied to each customs warehouse exit starting this week.

There are two reasons behind the overhaul of the tax system, according to Michel Conrad of Independent Wine and Spirits Ltd, a leading beverage importer with a global portfolio including Treasury Wine Estate and Concha y Toro:

“First, the new government wants to promote tourism.

Secondly, it tries to get rid of entities that underdeclare the exact quantity of wine they import.

But businesses have faced difficulties since the rule change came into effect.

All importers are now required to re-register each label with the excise department, and this time it is the customs and excise department that will determine the value of the wine.

An importer revealed that the Thai Excise website crashed two hours after registration opened.

As recently as March 10, companies were still unable to pay duties on bottles of wine since the changes came into effect at the beginning of the month.

But they stated that they hoped the situation would change this week.

Despite initial problems, the industry is largely optimistic.

Pairach Intaput, president of the Thai Sommeliers Association, said:

« People feel happy because the price of wine will surely be cheaper, but we have to wait and see the new result after calculation compared to the old tax. »

Before the change, concerns were raised about the impact the new rules would have on non-alcoholic beer.

GlobalData analysts said the changes could "clip the wings" of a niche category before it has truly taken off.

The changes are also likely to affect entry-level wines more severely, although high-end wines may become more affordable for Thai consumers as a result of the tax changes.

Currently, the calculations favor high-end wines (worth 1000 bahts and more) over low- or medium-priced wines (worth less than 1000 bahts), which is a change from the old system.

Wines priced below 1000 bahts were previously exempt from the 10% excise tax.

With the new tax system, all wines will be taxed at 5%.

According to Imbert, wines under 1000 bahts make up the value segment, accounting for 95% of the wines on retailers' shelves.

The 5% tax will eliminate most of the savings made through the exemption of import duties and the reduction of excise tax by volume.

European wines are also the ones that will benefit the most.

Countries that have concluded a free trade agreement with Thailand, such as Australia, Chile, New Zealand and Peru, are exempt from import duties, which means they will see no change.

With the new reductions, « they will be on an equal footing with Australia and Chile », says Imbert.

When will we see prices drop?

Photo : Asian Inspirations

Among the flood of re-registrations and new tax calculations, the question remains:

When will consumers see price reductions on store shelves?

The responses are varied.

It's not as if everyone will lower their prices by 30% tomorrow.

It will take a lot of time to implement it step by step, explains Conrad, as price changes need to be passed on throughout the entire supply chain.

« Maybe by the end of the year, we could see some effect ».

The impact on retail shelves could be faster.

« Because when we set the new price, the retailer automatically passes it on to the consumer », he adds.

Imbert, specializing in on-trade distribution, says that importers will reduce the cost price.

"There is so much competition that we will pass on the reduction to our customers, whether they are retailers or restaurateurs," he says.

Source: The Drinks Business