ASEAN Regulatory Brief: RCEP, Import Tax, Inheritance tax, SEZs, Soft Drinks Tax, and Fuel Tax
In this ASEAN Regulatory Brief, we look at some of the important regulatory changes taking place in the ASEAN-RCEP trade negotiations, Thailand, Malaysia, and the Philippines during the month of June.
Regional Comprehensive Economic Partnership
- 8th round of ASEAN RCEP trade negotiations
June 8-13 saw the 8th round of negotiations for the Regional Comprehensive Economic Partnership (RCEP) trade agreement. However, disagreement over tariff cuts has continued to prevent progress and has led many to question whether the end of 2015 deadline is feasible. Ministerial talks will be held again next month.
If completed, the RCEP would include the 10 ASEAN nations and ASEAN’s six free trade agreement partners: Australia, China, India, Japan, New Zealand, and South Korea. The resulting free trade area would link a third of the world’s GDP and 45 percent of its population.
- Thailand to update tax on imported cars, imposes inheritance tax
Thailand’s government is set to change the method of calculating how excise tax is calculated on vehicles imported into the country. According to the new tax changes, excise rates will be reduced and the tax would be based on the retail price of the vehicle, rather than its cost, insurance, and freight (CIF) valuation.
The new changes are intended to bring more transparency to the tax system and increase tax revenues. Previously, many importers often understated their CIF valuations in order to reduce the amount of excise tax they needed to pay.
Thailand has also begun moving forward with a new inheritance tax. A tax rate of five percent will be imposed on estates worth more than THB 100 million (~US$3 million) when the property is inherited by children of the deceased and a rate of 10 percent in all other cases. The inheritance tax is part of the country’s strategy to reduce social inequality and increase government revenues.
- Malaysia’s Labuan SEZ sees strong growth
Malaysia’s special economic zone (SEZ), Labuan, saw strong growth in 2014 and continues this positive trend in 2015. Labuan, which is located off the coast of Borneo in East Malaysia, saw a 12.3 percent year on year growth in new company registrations. Seventy percent of these new registrations were from companies originating in Asia. Labuan currently has 11,630 companies, 57 international banks, 209 insurance companies, 359 leasing companies, 130 foundations, and nine fund management companies.
Labuan Financial Services Authority Chairman Zeti Akhtar Aziz stated in a recent report that the SEZ has benefited from its central location in the fast-growing Asia-Pacific region and is “strategically well positioned to tap into the growing wealth creation within the ASEAN region…Additionally, the unique business propositions offered by the Labuan International Business and Financial Centre have continued to attract multinational corporations from across the globe to its shores.”
- Philippines moves towards new tax on soft drinks, and an excise tax increase on fuel
Legislation has been submitted to the Philippines House of Representatives that would impose a 10 percent tax on the selling price of carbonated beverages. The government intends to use the additional revenue generated to fund reconstruction projects in areas hit by natural disasters, such as typhoon Yolanda.
The International Monetary Fund (IMF) has given strong support to the new soft drink tax. Additionally, due to falling global oil prices, the IMF has also called upon the Philippines to impose a higher tax on fuels. The IMF believes that these taxes will help to boost government revenue and strengthen the country’s economy.
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