Thailand has plans to align automobile excise tax to vehicle emissions, moving away from the current system of tax based solely on engine capacity. This proposal by the Industry Ministry was agreed in principle by the Thai cabinet last week, and the Finance, Energy and Industry ministries have been given three months to study the issue.

One of the early proposals include a flat rate of 30% on vehicles below 3,000 cc. Of these, vehicles emitting less than 150 g/km would have 5% shaved off the 30%, while those emitting over 200 g/km will incur an extra 5%. Models that fall in between 150 and 200 g/km will be taxed 30%. Cars with engines larger than 3.0 litres will be taxed 50%, as per the current rate.

Understandably, not all are embracing this new idea with open arms. Thailand is a major producer and consumer of pick-up trucks, and they aren’t the most clean vehicles around. At present, trucks and SUVs are taxed lower than passenger cars at 3-20%, depending on type. The auto industry is also seeking for an adequate grace period.

“We agree in principle that the tax system should be revamped, but we want to achieve this goal smoothly since the restructuring will affect not only automobile manufacturers, but also parts suppliers. Our stance is to ask for time to adjust ourselves,” said Payungsak Chartsutipol, chairman of the Federation of Thai Industries.

“I really hope to see the government thinking about this aspect cautiously and transparently. The developed countries that designed tax rates based on emission spent many years to find the best solution,” he warned.

What do you think of this move? Is this a good example for Malaysia to follow?