Thai Govt Cautious on Diesel Tax Cut Proposal, Citing Fiscal Impact and Beneficiary Concerns

Ms. Lalida Pherthwiwatthan, Deputy Government Spokesperson, stated that while the government acknowledges the proposal from Mr. Korn Chatikavanij, a former Finance Minister, to reduce diesel taxes, careful consideration is necessary before implementation. She affirmed that diesel is a crucial cost factor across various economic sectors in Thailand, including transportation, agriculture, fisheries, and manufacturing. However, she emphasized that any tax measure must look beyond just the price at the pump. Ms. Lalida highlighted the need for further detailed examination regarding the potential loss of government revenue, the extent to which benefits would reach different segments of the population, the actual impact on commodity and transportation costs, and how low-income individuals or those not directly using vehicles would benefit. "Diesel is indeed everyone's cost, but that doesn't mean everyone will benefit equally from a tax reduction. Those who consume more fuel will naturally receive greater direct benefits, while for those without cars, we need to see if the cost reduction will genuinely translate into lower fares, food prices, and commodity prices," she explained. The International Energy Agency (IEA) has indicated that while untargeted energy price reduction measures can be implemented quickly, they have significant limitations. Higher-income households tend to spend more on energy, thus receiving larger monetary benefits. A case study in the Netherlands found that approximately 70% of the value from broad fuel excise tax reductions went to middle and high-income groups. During the 2022 energy crisis, governments worldwide spent an estimated USD 940 billion through subsidies, coupons, and tax cuts, with only about 25% being targeted measures. Low-income households in developed countries often spend about a quarter of their income on energy, suggesting that broad assistance may not reach those most severely affected. Ms. Lalida cited Germany's experience in 2022, where the government reduced the energy tax on diesel by 14.04 euro cents per liter for three months. This was coupled with a 300-euro energy subsidy for employed individuals, a 100-euro child bonus, and a monthly 9-euro public transport ticket. This tax reduction measure led to an estimated revenue loss of approximately 3 billion euros for the German government in 2022, illustrating that while tax cuts can help lower pump prices, the fiscal cost is not eliminated but rather shifts from budget expenditure to reduced tax revenue. "Mr. Korn's proposal is worth considering, but before moving billions of baht, the public needs clear answers on at least four points: how much revenue the government will lose, who will benefit and by how much, whether commodity prices will truly decrease, and what low-income individuals will receive. Therefore, the government must consider the entire system comprehensively before making a decision," Ms. Lalida concluded. Source: INN News