January 16, 2021

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Thai Excise Department to deploy blockchain tech to aid tax collection

The Excise Department aims to improve the efficiency of revenue collection rather than raise taxes to enhance the revenue outlook amid Thailand’s gradual economic recovery. Policy implementation should not affect the domestic economic recovery to continue the momentum, said the Director-General.

Raising taxes may stunt the economic recovery, leading the department to study tax collection of new goods rather than raising rates. The department has an obligation to collect taxes to meet the Finance Ministry’s revenue collection target.

For fiscal 2021, the target is set at THB530 billion baht, a figure close to the THB548 billion in tax revenue collected in fiscal 2020. The department will incorporate blockchain technology to administer revenue collection for fiscal 2021, he said.

The Revenue and Customs departments both plan to adopt this technology for their operations. Blockchain technology will help identify the price, import duty and tax liability of each imported product. The technology can help thoroughly assess revenue collection for each department and integrate revenue collection of the three government departments into a single database.

With blockchain, tax evasion should be difficult because the three departments will conduct tax audits in coordination with each other. A blockchain-integrated procedure in assessing the tax returns of oil exports is already in progress and it is expected to be implemented in next year’s first quarter.

The main reason to use blockchain technology for oil exports before other goods are because they generate revenue of more than 200 billion baht per year, accounting for two-thirds of the Excise Department’s total revenue collection. Blockchain should be able to help determine whether the oil is actually exported out of Thailand or if it is circulated for sale domestically, the official concluded.

In November 2019, the Excise Department was reportedly devising a method to refund overpaid taxes to oil exporters in a manner that stems leakages. The blockchain-based tax payback system requires oil exporters to pay an excise tax to the department and claim overpaid taxes after they ship the fuel. The new technology will let the department inspect the tax payments thoroughly.

The current practice requires oil exporters to submit documents for the tax waiver and the inspection is not as thorough as it could be. It was noted that the tax refund process will take a shorter time if oil exporters file complete and correct documents.

The department is in talks with Krungthai Bank (KTB) on setting up the blockchain-based tax refund system. A source in oil trading circles said the excise tax exemption for oil exports amounts to THB6 billion a year, and the new practice could create further costs to operators if the tax-collecting agency’s tax refund process is lengthy.

Oil exporters want the department to create a system that can refund taxes rapidly, said the source, who requested anonymity.

The department has joined with KTB to adopt blockchain technology to upgrade services on the digital platform. Blockchain technology for exported oil tax refunds is one of three pilot projects, alongside e-bank guarantees and annual fee payment for liqueur, tobacco and playing card distribution licences.

Blockchain technology will strengthen security and let the department access data quickly and accurately, upgrading services more transparently and effectively, the second source said.

The technology will improve efficiency in data management, as it can verify processes thoroughly, starting from oil transported from refiners to depots and, finally, destination countries.