Road congestion at 40 billion baht a year

The government’s promise regarding making entry-level motor vehicles affordable for those who could qualify has led to a massive surge in the numbers of cars on the roads of Thailand.

The 2011 floods which swept down the central plains and inundated parts of Bangkok prompted a government initiative to boost sales of motor cars. The scheme called for tax rebates to be paid to any person who could prove they were a first-time car buyer and they purchased an approved make and model. The first-time car buyer scheme ended on 31 December 2012.

Now it’s time to imagine what the fiscal cost of this exercise in economic largesse is likely to be. The government knew there would be a future impact on its coffers and according to the Excise Department this figure is going run to 40 billion baht for the 2013 financial year.

A further 40 billion baht has been set aside by the Excise Department for the rebates expected in the fiscal year 2014. In 2015 the rebate amount is expected to drop to just 11 billion baht. So, all told, the government is going to hand over around 91 billion baht in rebates over a three-year financial year period.

This is three times what they estimated. Instead of a three-year 10 billion baht or so per annum run on the vaults, the figure of 90 billion baht must surely have the number crunchers thinking hard about ways to lessen the overall financial impact on the government’s fiscal bottom line.

Naturally, the Excise Department is making soothing noises in this area, suggesting as long as the five percent economic growth forecast does indeed turn into a reality then it expects to reach its tax revenue target of 412 billion baht for 2013.

The scheme of course was hailed a massive success in terms of actual vehicle sales. No less than 1.25 million cars and trucks were sold to first-time buyers and there’s not a driver in Bangkok or Pattaya who hasn’t noticed an almost flood-like surge in the numbers of cars on the roads.

The incentive deal for these buyers was certainly tempting. A maximum of 100,000 baht could be claimed back on any one vehicle. The catch was that the rebate could not be claimed until after the vehicle had been owned for a minimum of 12 months and, just as importantly, the car must remain in the first-time buyer’s ownership for at least five years.

Once the rebate has been claimed and received at the end of the first year the question is how closely will the next four year minimum ownership period be scrutinised?