BANGKOK: The Thai government said it will scrap import duties on luxury watches, clothes and cosmetics to help the country compete with Hong Kong and Singapore for wealthy travellers from markets including China. The duty on some luxury goods will be cut to zero from 30% by the end of the year, Permanent Secretary for Finance Areepong Bhoocha-Oom told reporters in Chonburi province.

The government expects tourist arrivals to surge 18% to 26.4 million this year, helping to counter a slump in exports and domestic consumption that may cause the economy to grow as little as 3.8%. Thailand’s tourism and services industries account for 50% of GDP.

“The tax cut on luxury goods would add a new catalyst for Thailand’s tourism sector,” Itphong Saengtubtim, the head of research at KGI Securities (Thailand) Pcl in Bangkok, said by phone yesterday. “Tourism-related companies still have strong earnings outlook as growth in foreign visitors has been unaffected by the global economic slowdown.”

Chinese tourists, who spent US$105 billion (RM348.6 billion) overseas in 2012, are forecast to make 94 million trips this year, almost double the level in 2009, according to the China Tourism Academy.

Thailand’s tourist arrivals increased 16% to 22.4 million last year, according to government data. The number of visitors from China surged by 62% to 2.8 million. Singapore attracted 14.4 million visitors last year, according to preliminary government figures. Arrivals from China increased 23% to 1.5 million in the first nine months of last year, according to the most recent data. The Singapore government expects arrivals to increase to as many as 15.5 million this year.

“We can easily compete with Hong Kong and Singapore,” Tos Chirathivat, CEO of Central Retail Corp, said yesterday in an interview. “Our infrastructure, our malls are the same or better. We have more. The service is good. The rental cost is lower and labour cost is lower.”

“We may lose some revenue from the tax cut, but I don’t think it will be a lot,” Somchai Sujjapongse, head of the finance ministry’s Fiscal Policy Office said. “We will in turn get more from VAT and other taxes.”

Thailand levies a value-added tax of 7% on goods and services, the same level as Singapore’s GST.

“Thailand sits right in the middle,” said Tos of Central Retail, one of Thailand’s biggest operators of luxury malls. “If we look at India, China, Hong Kong, Singapore, whatever, within three-to-six hours flight, people can come easily for the weekend.” — Bloomberg

This article first appeared in The Edge Financial Daily, on September 10, 2013.