Spas must pay ‘entertainment’ tax

PHUKET: In an effort to clear up confusion over taxes payable by the island’s spa industry, the Excise Department has confirmed that it classes most of the island’s spa businesses as entertainment venues – and therefore subject to 10% excise tax. “Spas that operate as entertainment venues [as opposed to beauty or health treatment facilities] must pay 10% excise tax, the same as massage parlors,” said a spokesman for the Phuket Area Excise Office (PAEO) during the Governor’s press conference at Provincial Hall on June 1. “Spa businesses seem to have misunderstood the new Ministry of Finance regulations of January 28, 2003,” said the spokesman, speaking on behalf of Supatra Horsrisumpun, Chief of the Phuket Area Excise Office. The controversial regulations were intended to allow the government to collect excise tax on entertainment venues – including those presumed to offer commercial sex services To clarify, the Excise Department’s Phuket Office issued a statement specifying that a spa must pay the 10% tax if any of the following three conditions apply to its operations: 1. It holds a license to operate a massage parlor under section 3(3) of the Entertainment Act of 1966. 2. It offers bathing and massage services in the same area. 3. It provides pictures, numbers, or designated areas that facilitate customer selection of particular staff members to provide service. “We have already performed an inspection and found about 20 establishments that should have been paying excise tax, but weren’t,” said the spokesman. Pakin Ruktae-ngam, Chairman of the Phuket Spa Business Club, told the Gazette that the 10% excise tax on spas is unfair because spas are one of three businesses that have the approval of the government as part of its plan to develop Thailand into the “health hub” of Asia. The other two kinds of business – hospitals and producers of herbal remedies – are not subject to such a tax, he pointed out. K. Pakin said the tax would cut into the growing spa industry, which, if left alone, could generate revenue for the country more quickly than hospitals or herb producers. “Spas have higher investment costs than ordinary massage parlors because they require expensive equipment and trained practitioners, yet they are forced to pay the same 10% tax as ordinary massage parlors,” he said. “I understand the government’s worries about the commercial sex industry. But this tax won’t make any difference. There are still many massage parlors without bathing facilities where commercial sex is available. The two issues are unrelated,” he said.