THE ADVANTAGES AND DISADVANTAGES OF TAX LAW CO-ORDINATION BETWEEN THAILAND AND OTHER COUNTRIES IN ASIA REGION: THE CASE STUDY OF REDUCTION IN TARIFFS UNDER AGREEMENT ON ASEAN FREE TRADE AREA

Abstract

The import-tariff rate reduction under AFTA has the following important positive effects: reduction in importers’ incentive to avoid and evade customs duties and to commit customs offences, reduction in tax distortion in people’s decisions on the purchase of goods imported from ASEAN region, having no cause for the pushing of tax incidence levied on imported goods back to export countries, reduction in the influence on people’s decisions on investment choice within ASEAN region, helping customs duties/tariff law to keep pace with the world’s economic situation and trade, reduction in the officials’ corruption in Customs Department, and decrease in international trade barriers.

The above positive effects encourage Thailand to further negotiate and enter into Free Trade Agreements (FTA) with other countries. To encourage Thailand’s negotiation and entering of further FTAs, the researcher has suggestions that the reduction of import-tariff rates should be set at the optimal level by taking the negative effects of reduction in import-tariff rates into consideration as a partially fundamental factor in adjusting the rate reduction together with other factors; additionally, in order to help FTA partner countries to comply with the rules in the agreement strictly and completely, they should jointly produce Explanatory Memoranda to explain rules in the agreement.

The import-tariff rate reduction under AFTA has the following important negative effects on the contracting parties in addition to positive effects: decrease in government revenue from customs duties levied on imports, not promoting the undertaking of fiscal policy pertaining to the government’s public debt that requires people to have savings, not promoting the vertical equity of taxation and the principle of equity of income redistribution, not help solving the price-inflation problem that requires the reduction of people’s purchasing power, not having been used as a tool for controlling imports for the protection of domestic industries, degrading the role and duty of Customs Department, not conforming with the principle of efficiency of taxation due to the fact that abundant rules in many notifications of Ministry of Finance and Director-General of Customs Department being made in accordance with AFTA increase the complexity of tariff law and make such law hard to comply, and not conforming with the idea of a good tax system requiring tax law to be legislated by Parliament and to be regarded as Parent Act; however, notifications of Ministry of Finance and Director-General of Customs Department being made in accordance with AFTA are regarded as subordinate legislation being made by administrative bodies concerning the reduction of tax rate that is regarded as a substantial part of tax structure which should be subject to the legislative process of Parliament.

The researcher has following suggestions for the improvement of law on tariff to diminish the above negative effects.

In order to reduce the complexity, confusion and difficulty in understanding for complying with many subordinate tariff laws concerning the reduction of import-tariff rates under AFTA and international agreements with which importers must comply, rules, regulations, criteria and procedures dealing with the reduction of import-tariff rates under AFTA and international agreements with which importers must comply, which appear in many subordinate tariff laws, should be consolidated into one Parent Act under the system of Consolidation in the form of Act of Parliament. In addition, at the time of the consolidation of many relevant subordinate tariff laws into one Parent Act, the governmental agency who is responsible for making and consolidating the law should simultaneously produce Explanatory Memoranda to explain the provisions of such Parent Act.