Election and Chinese New Year tipped to fuel growth

Election and Chinese New Year tipped to fuel growth

An election, as well as the shopping tax break, will boost the real sector this year, according to the Thai Retailers Association.
An election, as well as the shopping tax break, will boost the real sector this year, according to the Thai Retailers Association.

Thailand's 3.6-trillion-baht retail sector is expected to grow by 3% this year, boosted by the shopping tax break for Chinese New Year and the upcoming election.

Worawoot Ounjai, president of the Thai Retailers Association, said the spending power of consumers in the first half of this year is likely to outpace spending during the first half of 2018, mainly because of the government's shopping tax incentives from Feb 1-15.

The cabinet in mid-December approved a value-added tax (VAT) refund for those who spend during the designated period, which coincides with Chinese New Year on Feb 5.

Thailand has a 7% VAT on domestic purchases of goods and services.

Refund claimants are required to pay via debit cards linked to savings accounts using PromptPay at shops that have electronic data capture machines connected to point-of-sale terminals. This enables spending information to be directed to the Revenue Department.

Purchases made through the government's welfare smartcards are not entitled to VAT returns.

The VAT will be refunded through PromptPay, the government's online money transfer system.

Qualified shoppers will be eligible for a 5% VAT refund for every purchase of products and services that includes VAT. The remaining 2% of VAT will go to the government's coffers.

To receive the maximum 1,000-baht VAT refund, shoppers will be required to spend 21,400 baht.

Mr Worawoot said a large volume of money is expected to circulate as a result of political campaigns preceding the election, which should deliver a positive impact on consumer confidence, encouraging more spending. That in turn will be good for the overall retail industry, albeit only in the short term, he said.

"Growth of Thailand's overall retail industry remains lower than the country's GDP, and the industry's growth is the lowest compared with retail business in other Asean countries, which have an average growth of 10%," Mr Worawoot said.

He blamed the industry's low growth on relatively high import tariffs on luxury items.

Mr Worawoot urged future governments to rejig the import tariff structure and have a clear policy on duty-free business to build sustainable growth in Thailand's retail business.

"We hope the new government will understand this problem and reconsider a fair import tariff structure. If the new government has a clear policy on these issues, we believe the GDP will rise by another 2%," he said.

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