Thailand to introduce carbon tax by 2025, oil tax burden unchanged

The Excise Department plans to introduce a carbon tax by 2025, with the overall oil tax burden expected to remain unchanged. This move aims to align with the Global Warming Act, which is set to be enacted in 2025.

According to the Director-General of the Excise Department, Ekniti Nitithanprapas, the department has examined global practices for implementing a carbon tax and intends to adopt international standards, focusing on taxing emissions at the source.

He highlighted the shift in vehicle tax bases from engine displacement to carbon dioxide emissions. For example, vehicles emitting over 200 grammes of carbon per kilometre are taxed at 35%, while those emitting less than 150g per km are taxed at 25%, said Ekniti.

“The carbon tax collection will begin with oil, and the department can implement this tax without the need for new legislation.”

He assured the public that the carbon tax would not increase their burden, as it would simply convert part of the existing oil tax into a carbon tax.

For instance, the current excise tax on diesel stands at 6.44 baht per litre. Given that diesel emits 0.0026 tonnes of carbon per litre, the carbon tax rate of 200 baht per tonne of carbon equates to an average of 46 satangs per litre.

Diesel tax

This carbon tax will be incorporated into the diesel excise tax structure of 6.44 baht per litre.

Thailand’s carbon tax rate is comparable to Singapore’s, making it the second country in ASEAN to implement such a tax. The future implications of the tax were also heavily considered by Ekniti.

“In the future, when we refuel, we will know how much carbon is emitted. Initially, this will not affect the public.”

He also noted the immediate benefits, particularly with Europe set to introduce its Carbon Border Adjustment Mechanism (CBAM) in 2026 for five types of goods.

Export-oriented factories, such as Thai steel mills that use diesel in their operations, will have a carbon tax included in the diesel price. The department is negotiating for this carbon tax to be deductible to help Thai businesses remain competitive.

Additionally, the department supports measures promoting electric vehicles (EVs), which have led to a significant increase in EV usage. In 2024, EV sales grew by 685% compared to the previous year, while the excise tax rate on EVs decreased from 8% to 2%, reducing the excise tax collected from these purchases.

Drastic carbon reduction

This measure contributed to a reduction of more than 240,000 tonnes of carbon emissions.

The government has also encouraged manufacturers to establish EV production plants in Thailand, with 22 companies participating in this initiative, resulting in over 80 billion baht in investment.

The department is also examining battery tax collection, currently set at 8% for all types, including car batteries, flashlights, and power banks.

Ekniti mentioned that the department aims to differentiate these rates, particularly to incentivise environmentally friendly practices through tax reductions for recycling.

“Environmentally friendly practices are a global priority, especially in Europe, which will fully implement CBAM in 2026, affecting traders.”

To mitigate these effects and enhance competitiveness, the Excise Department is preparing mandatory mechanisms for businesses through excise tax law, reported Bangkok Post.