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Proposed Overhaul of Battery Tax to Incentivize Energy Efficiency

Proposed Overhaul of Battery Tax to Incentivize Energy Efficiency

The Finance Ministry intends to propose a revision to the battery tax to the cabinet next month, shifting from a flat rate applicable to all battery types to a tiered system. Under this new structure, more energy-efficient batteries would be subjected to a lower tax rate compared to less efficient ones.

Deputy Finance Minister Paopoom Rojanasakul stated that the Excise Department is preparing this new tax framework, aiming to encourage manufacturers to produce batteries that are more environmentally friendly. He noted that the revised tax structure would favor batteries with higher energy density and efficiency by applying a reduced tax rate.

Currently, the excise tax on batteries stands at 8% of the retail price.

Mr. Paopoom explained that this new tax structure will encompass all battery types and has been discussed with relevant stakeholders, who support the proposed changes given the industry’s emerging nature and its focus on environmental sustainability.

He cautioned that if outdated technology leads to increased pollution, production costs could rise due to higher tax rates in the future.

When addressing tax policies in relation to the automotive industry, Mr. Paopoom emphasized that the government will not favor one type of vehicle over another, whether it be internal combustion engine (ICE)-powered or electric vehicles (EVs).

Domestic producers play a crucial role in the supply chain, supporting small and medium-sized enterprises (SMEs) and employment; therefore, the government will continue to back the production of all vehicle types.

The Deputy Minister remarked, “The government’s automotive policy aims to balance the interests of EVs and ICE-powered vehicles. We should not neglect the ICE vehicle sector, which has a strong production foundation in Thailand and is a key component of the auto parts supply chain driven by SMEs.”

Regarding former US President Donald Trump’s withdrawal from climate agreements, he noted that the Thai government remains committed to green initiatives to address trade barriers.

“We need to prepare the country, as we are falling behind in areas such as reducing carbon emissions from oil consumption, which constitutes 70% of Thailand’s total greenhouse gas emissions,” Mr. Paopoom added.

Additionally, the cabinet recently approved a draft regulation from the Finance Ministry to implement a carbon tax of 200 baht per tonne of carbon equivalent, aimed at boosting the competitiveness of Thai products in the global market.

This carbon tax will be integrated into the existing oil tax structure, combining an excise tax on oil with the new carbon tax, while ensuring that the overall oil tax rate remains unchanged.

Products subject to the new carbon tax include gasoline, various types of gasohol, kerosene, jet fuel, diesel, biodiesel, liquefied petroleum gas, propane, bunker oil, and similar oils.

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