New ASEAN Economic Community (AEC) governments will see loss of tariff revenue but increased economic activity



[GBP Note:  This is a good article illustrating some of the trade-offs governments face when creating an economic community or free trade association.  The goal of the ASEAN Economic Community (AEC) is to "transform ASEAN into a region with free movement of goods, services, investment, skilled labour, and freer flow of capital."  Governments generally hesitate to give up known tariff revenues for future tax revenues from increased economic activity, but it the best way to support long-term growth.]

Trade Boom to Offset Tariff Loss
WICHIT CHAITRONG
THE NATION July 5, 2012

Slashed tariffs under the Asean Economic Community (AEC) will cost Thailand Bt7 billion to Bt8 billion a year in lost revenue, but the Customs Department expects this to be compensated by soaring intra-Asean trade.

As import tariffs currently imposed on goods from Laos, Cambodia, Myanmar and other Asean members will be cut to zero in 2015 when the single market starts, it will take a toll on revenue, Somchai Poolsawasdi, director-general of the Customs Department, said yesterday.

However, the anticipated rise of intra-regional trade in Asean may bring greater benefits to the overall economy, he said.

Thailand’s border trade was worth Bt899 billion last year, up 15.6 per cent from the year before, and the country enjoyed a trade surplus due to exports of Bt587 billion. But border trade is expected to soar under the AEC.

The department will also step up its scrutiny of whether investors in Asean meet local-content requirements, he said. If they do not, they cannot enjoy tax privileges under the Asean Free Trade Agreement.

The department plans to build a new customs office at Ban Phu Nam Ron in Kanchanaburi province, as two-way trade there is expected to take off when the Dawei deep-sea port and industrial park in Myanmar are constructed, he said.
[GBP Note:  See this article in the Irrawaddy Dawei in Doubt as Thai Port Talk Grows]

Several new customs checkpoints will be also built at the new border-crossing points, he said, while the old offices would be renovated and expanded.

Asean customs authorities have negotiated the streamlining of border checkpoints to save costs and move transport efficiently, Somchai said. If goods are examined by Thai customs officials when they reach the Laotian border, for example, there should be no need for a second check.

A national single window, which will allow exporters and importers to apply for customs clearance at one point electronically, is expected to be ready by the end of this year, he said.

More intra-Asean trade is expected to provide a cushion for the impact of the European crisis, he added.

 





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