When wine distribution and consumption are discussed by professionals, the focus is often on supermarkets, specialist and online retailers and, increasingly in the US, Direct-to-Consumer. For some markets, however, wine and on-premise sales to tourists, are of crucial importance.
This explains the decision by the recently-elected Thai government on January 2, to cut excise duty on wine from 10% to 5% and to remove the 10% duty on spirits. Swingeing import duties will also be removed for the next 12 months.
Thailand imports around 18.5m litres of wine with a pre-customs value of around 4bn baht or $114.5m According to Thai Customs figures, this represents a retail value of 20bn baht ($572m). While there is a retail sector in Thailand, most wine is sold and consumed in international restaurants and hotels at prices of between 1,300 baht ($37) and 2,500 baht ($71.5) per bottle.
Australia, with 33% of the market, leads the field, followed closely by France, with 32%. Italy and the US have around 9% each, followed by Chile with 7.5% and New Zealand with 3%. Of these, all except France and the US benefit from Free Trade Agreements, and an FTA with Europe is expected to be signed this year, so import duties are somewhat less of an issue than might be supposed.
Complex taxation
Alcohol taxation is very complex in Thailand. For those countries that are affected by import duties, these are effectively 54% calculated on the costs of purchase, shipping and customs handling.
There are also two separate tiers of excise duty, one based on value and the other on alcohol. Wines are subject to a tax rate of 1,500 baht ($43) per litre for 100 degrees of alcohol content. So, for a 13% wine, the tax would be 146 baht ($4.18) per bottle. The reduction of this rate to 1,000 baht per litre, will cut the tax to 97.5 baht ($2.79).
Wines priced below 1,000 baht ($28.60) are subject to a zero rate of price-based excise duty. Those with a higher value have carried an extra excise duty level of 10%. This has been reduced to 5%.
Finally, local taxes add an additional 17.5% to the total excise duty. These remain unchanged.
According to the Bangkok Post, the reduced income to the Thai treasury will be compensated by an increase in tourist numbers from last year’s 128m to 134m in 2024. Wine-loving Thai citizens will have to hope that these numbers are achieved - and that Thai distributors, retailers and restaurants pass on all of their savings. Unlike their counterparts in Hong Kong when taxes were cut in the former UK colony.
