Thai e-commerce faces shake-up due to new revenue department mandate

Thailand’s e-commerce industry is set for a shake-up following a recent decision by the Revenue Department to mandate digital platforms to report income earned from their online sellers.

Analysts predict that this may result in a 10% reduction in the number of online shops on platforms, as some merchants may resist revealing their true earnings.

The move is aimed at providing the department with a clearer picture of tax payments from merchants, thus facilitating fair competition among local and international sellers.

On December 27, the department decreed that electronic platforms based in Thailand with revenues exceeding 1 billion baht (US$28 million) in an accounting cycle must establish an electronic special account.

This measure will be enforced from January 1 onwards. The special account will disclose the revenue garnered by platforms from their online sellers, which must be submitted to the department, reports Bangkok Post.

Kulthirath Pakawachkrilers, president of the Thai e-Commerce Association, described this directive as a “game changer” for the e-commerce sector.

She anticipates a 10% decline in merchant numbers this year as some sellers may close their shops either temporarily or permanently to avoid disclosing their actual income.

Another potential impact is that online sellers who comply with tax payment rules may face more equitable competition within the industry, as it has previously been challenging for them to compete price-wise with those who do not pay tax.

Kulthirath also raised the possibility that sellers who decide to adhere strictly to tax payment rules may increase product prices to cover increased tax costs, thereby impacting consumers.

Paul Srivorakul, Group CEO of aCommerce, an e-commerce enabler based in Southeast Asia, pointed out that the new regulations could significantly impact both existing and upcoming players in the market.

“First, we need to understand why the regulators imposed these new regulations. The goal is to combat cross-border merchandise that is hurting local brands and businesses, especially small and medium-sized enterprises (SMEs)”

He suggested that with access to this data, regulators might insist on marketplaces prioritising Thai merchants, potentially affecting overseas merchants’ revenues, local product diversity, and market competitiveness.

For consumers, this could translate into potential price hikes by local sellers finding it challenging to compete with inexpensive products from China.

He also suggested that cross-border merchants who have found success in Thailand may be incentivised to enter the market through distributors or partners and conduct business through a local entity, a move seen as beneficial by local authorities.

Thanawat Malabuppha, honorary president and advisor to the Thai e-Commerce Association, stated that the announcement underscores the necessity for both online and offline sellers to pay taxes, which will enable the department to access data about online sellers via their platforms.