Don’t be so tough on us says major fashion importer

Arguing it would be better to start concentrating on raising added revenue from property developers and foreign business operators, the managing director of the Central Group of Companies said he would be pressing for a reduction in import taxes on luxury fashion goods.

Chart Chirathivat said his company wanted to raise the profile of Thailand as a shopping destination, but high import taxes on fashion and luxury items have resulted in relatively disappointing financial returns in this sector. Khun Chirathivat noted, on average, import tax on these kinds of goods ran at around the 30 percent mark.

The managing director claimed a significant tax reduction would help boost sales and increase tourism, especially at the luxury end of the market among those travellers with high spending power.

He claimed if the luxury tax rate was cut this would also help the high-end hotel market, as well as internal tourism operators, airlines, and, of course, the food and beverage sectors. He noted how tourism into Malaysia, as an example, had blossomed after significant tax reductions were introduced.

His argument is that local big spenders are choosing to purchase their luxury items overseas, thus cutting out a lot of local quality malls and shopping centres.

Khun Chirathivat suggested if import taxes on luxury items were reduced it would lead to many Thais purchasing these kinds of items internally rather than buying out of Hong Kong and Singapore.

A survey conducted by the local retail industry suggested Thai consumers spent over six billion baht on luxury designer clothes in 2012, a 20 percent jump from the previous year. This is a massive amount of potential revenue going overseas rather than being spent in-country and adds weight to the argument for lowering import taxes on these items.

Indeed, if past experience in other jurisdictions is any indicator, a lowering of the import duties would not necessarily lead to a significant loss in government tax revenue from this sector.

A significant percentage of those locals who previously were travelling to Hong Kong and Singapore and other destinations to engage in shopping for luxury items would almost certainly start spending within the local market and overseas travellers who were previously reluctant to purchase much in the way of luxury items inside Thailand would be encouraged to start making these kinds of purchases.

The end result should, in the very short term, lead to revenues remaining around the same level or even increasing because of the greater volume of sales. This, in turn, should negate the need for the government to turn to other lucrative sectors in search of ways to make up the income shortfalls.