BANGKOK, Thailand – Thailand could consider selective cuts to fuel excise taxes on E20 and B20 if higher oil prices from the Middle East conflict require additional measures to ease the impact on consumers, Finance Minister Ekniti Nitithanprapas said. Ekniti, who is also Deputy Prime Minister, said the government has three main tools for managing domestic energy prices: using the Oil Fuel Fund, seeking cooperation from oil refineries to use excess refining margins to help reduce fuel prices, and adjusting fuel excise taxes.
The government has so far refrained from cutting fuel excise taxes because doing so would reduce state revenue while public spending remains high, potentially requiring additional borrowing to make up the shortfall. If an excise tax reduction becomes necessary, however, the government could focus on selected fuel types, particularly E20 and B20.
E20 contains a high proportion of ethanol produced from sugar cane and cassava, while B20 contains a higher proportion of biodiesel made from palm oil. Focusing tax relief on these fuels would allow more of the benefit to flow directly to Thai farmers, Ekniti said.
He also stressed the importance of maintaining fiscal discipline when considering measures to cushion the impact of higher energy prices. Thailand has only limited fiscal room remaining in the current fiscal year, which ends in September, with borrowing capacity estimated at just over 10 billion baht.
Ekniti said an imprudent tax cut could weaken the country’s fiscal position and risk creating a fiscal crisis on top of the existing economic pressures in the next fiscal year. The government will therefore reassess available fiscal space before deciding on further policy measures. Ekniti also cited a recent assessment by Fitch Ratings, saying the ratings agency had found that Thailand was managing energy-related challenges while continuing to maintain fiscal discipline.
