The new tax, and alleged heavy-handed approach by officials in its collection, is being branded as possibly the final straw killing off entertainment businesses in Phuket’s busiest tourism town.
Mr Prab, a son of long-time former Patong Mayor Pian Keesin, late last week went public in saying that the tax is too much for local businesses, who are already suffering heavily from plunging tourism figures.
Mr Prab branded the excise tax as “state sponsored extortion”, and blamed the tax for businesses having to hike prices in a town that already has some of the highest ground rents on the island.
“Patong is already experiencing economic problems, and it is the low season, ” Mr Prab said.
“At the same time, through its new tax calculation, the Excise Department is trying to take 11% tax from the income of entertainment operators each month,” he told The Phuket News this week.
Mr Prab estimated that 35% of entertainment businesses in Patong’s usually-bustling entertainment district, centred around Bangla Rd, had already folded.
He also warned that more closures were to follow.
The “new” 11% tax is technically a 10% levy on incomes on all entertainment businesses, plus a 1% “general tax”, introduced under the revised Excise Tax Act which came into effect on Sept 16, 2017.
Now, with a full Thai tax year concluded since the new levy was introduced, tax officials are calling for operators to pay up – something that Patong business operators say they simply are unable to do. The current state of tourism in Patong has left entertainment business operators high and dry, they say.
Despite officials continuing to report record numbers of tourist arrivals, the island’s top nightlife drawcard Bangla Rd in Patong has been taking a battering in business in recent years as the tourists visiting Phuket – and especially Patong – have changed in terms of demographics and source markets.
Weerawit Kreuasombat, President of the Patong Entertainment Business Association (PEBA), which represents some 500 entertainment businesses in Patong, only in December last year branded this most recent tourism high season in Phuket as “the worst high season in Patong in 10 years”.
“Businesses have started to close down because of many reasons, such as global trade war, causing slower growth and less tourists – and the excise and revenue departments are pushing to collect more tax from entertainment businesses,” Mr Prab said.
Mr Prab accused the move of being nothing more than heavy-handed approach to fill state coffers. “It is part of the government plan to pressure officials to increase tax collection so the government has more funds for its budgets in the next fiscal year,” he said.
Business owners were not prepared for the tax, Mr Prab added, and accused officials of not informing them properly of what the new tax required.
“We and other businesses didn’t have a chance to prepare for this 11% tax. We have been adding only 7% for the to customers’ bills,” he said.
“This is not the right time to strictly enforce higher tax collection. Flexibility is needed. We have fewer tourists and businesses are making less money, so they can’t pay what officials are asking. They would be paying out more in taxes than they are earning,” he added.
“The current situation is really impacting every entertainment industry related revenue. Right now, 50-60% of operators are asking for rental discounts, 30% have closed shop and vacated the premises, hoping to open in November for the next high season.
“Landlords are also starting to adjust, slashing their rents by as much as 50% in order to survive. The situation will affect jobs as well, as employers let go of employees. This in turn will affect Phuket’s economy more, causing more suffering,” Mr Prab said.
Mr Weerawit said that some officials had no sympathy for business operators who are unable to pay their outstanding taxes.
“Some of them said that if you can’t understand the tax, then close your business. I think that it is not right,” he said.
“With one big entertainment venue, officers are asking for more than B30 million in last three months, with B10mn being the tax bill and a further B20mn in late-payment fines. That it is hard to pay in the low season. The businesses can’t adjust quickly enough to pay this tax and they are not happy with it. And entertainment venue owners don’t understand the tax, and do not accept the officials’ actions as they do not match the reality of the situation,” he added.
“It is unacceptable. Next owners will have no choice and might increase their prices just to survive, and that too will affect the number of tourists coming here. They might not come because it is too expensive,” Mr Weerawit said.
“We don’t want to break the law, but we can’t pay this tax right now. We know that we must pay our taxes, just like anyone else. We are asking for flexibility so we can pay the correct tax some other time, such as the high season.”
The PEBA has drafted a letter to be sent to Phuket Governor Phakaphong Tavipatana, calling for his support, Mr Weerawit said.
“We will present to Governor Phakaphong as fast as possible. We hope he will find a way to help us,” he said.
BROTHERS IN ARMS
More support is coming from Thanusak Phungdet, the newly appointed President of the Phuket Chamber of Commerce.
Mr Thanusak highlighted how Phuket businesses were already suffering from global economic pressures.
“I think that Phuket’s current economic situation is the from the combination of many things. The country’s politics have not been resolved, and there have been problems with Chinese businesses and tourists. There were accidents from buses and boats, and China is amid a trade war with America.
“Even Russia is experiencing internal problems, and the value of the baht is a bit stronger, causing tourists to think more and look for other countries instead of coming to Thailand. In addition, during Ramadan (whcih has just concluded), tourists disappeared.
“All this affects Phuket, causing occupancy rates to fall from from 75% to just 50-55%. When the number of tourists falls about 20%, income disappears, causing entrepreneurs to suffer. All these factors negatively affect businesses, and it is all happening at the same time. It's a situation that we have never encountered before,” Mt Thuangdet said.
“As for taxation, this might make the situation worse, but I can't answer in detail on this issue. But I believe the situation will get better. and return to normal. We have to look at (start talking with) each other.
“However, the government should do more preparation and planning for business and entrepreneurs during the low season. During low season, there may be a need for an active marketing plan for Phuket, as a way to promote Phuket and bring higher numbers of tourists. Publicity for Phuket, during the low season needs to be stronger than this.
“And we must have roadshows for Thai people in other provinces to visit Phuket, because a management and planning approach is required for the government and private sectors.
“I will present the concept to the public and private committee meeting to solve the economic problems of Phuket this week. I will highlight the resolution for the private sector. We will make presentations on promoting domestic travel, airlines and various types of accommodation. Proposing the solution to the Governor of Phuket is the way to reach to the government level,” he said.