It has also offered to set up a public committee that would follow up the restructuring of import tax regulations and send details of its proposals to Industry Minister Kosit Panpiemras next week.

Explaining the moves, TDRI researcher Nipon Poapongsakorn said importers presently had to pay a duty of 1 per cent for upstream products, 5 per cent for mid-stream products and 10 per cent for downstream products.

The tax structure is not only ineffective, it has a distorting effect.

According to simulation models designed by the TDRI, the government should reduce import duty to zero for all processes, from upstream to downstream.

The institute is proposing that import duties be restructured in four steps.

First, import duty should be reduced from the current rate to zero for upstream products, 5 per cent for mid-stream and 7 per cent for downstream within three years.

Second, the rate for downstream products should be reduced to 5 per cent within five years, followed by a reduction to 3 per cent for both mid-stream and downstream goods within 10 years.

Finally, all processing goods would be exempted from import taxes within 15 years.

Nipon said the restructuring would urge more effective production processes in Thailand and increase economic growth in the long term.

Although manufacturers benefit from the Asean Free-Trade Area and various other free-trade agreements, about 76 per cent of imported upstream and mid-stream goods come from other countries, particularly Japan. Therefore, tax reduction will help manufacturers reduce their production costs, he said.

The proposed public committee will study the effects of the tax restructuring, draw up the restructuring plan and offer the plan as a means for boosting industrial productivity.

It will also consider excluding some industries from the tax reductions because of their negative effects on the environment.

Nipon said the TDRI proposes that the committee should consist of the industry, finance and commerce ministers, along with researchers and representatives from the private sector.

It should be set up within the term of the interim government.

Representatives from the Federation of Thai Industries have suggested that the committee should be an independent organisation supported by new laws.

Chalida Ekvitthayevechnukul

The Nation