Thailand Considers Gold Tax Amidst Currency Concerns

Thailand Weighs Gold Tax to Curb Baht Appreciation

Thai authorities are reportedly considering imposing a tax on physical gold transactions as the strength of the Thai Baht threatens exports and tourism, and unusual surges in gold exports to neighboring Cambodia raise concerns.

Proposed Tax Details

According to sources, the Bank of Thailand and the Ministry of Finance are discussing taxing gold purchases and sales conducted online and settled in Thai Baht. Any such tax would likely exempt gold transactions denominated in US dollars, futures trading, or gold purchased from brick-and-mortar stores.

Objectives of the Tax

The authorities aim to reduce gold exports and increase the cost of holding gold for Thais. Officials believe that dollar inflows linked to gold exports are contributing to the Baht's appreciation.

Meetings and Discussions

Central bank officials are scheduled to meet with gold trading company representatives to discuss gold's impact on the Baht and how to strengthen transaction reporting. Consultations between the Ministry of Finance and the central bank will continue, with a final decision expected after the new cabinet is formed. The tax could be introduced as a special business tax.

Gold Exports and Illicit Trade

In the first seven months of this year, Thailand's gold exports surged by 69% year-on-year, reaching 254 billion Baht ($8 billion). The abnormal increase in exports to Cambodia has prompted calls for investigation. The chairman of the Federation of Thai Industries noted that the sharp rise in gold and jewelry exports to Cambodia since last year is disproportionate to the country's size and demand, raising suspicions that gold may be used as a tool for money laundering by criminal groups and casinos.

Impact of Baht Appreciation

Global gold prices have risen nearly 40% this year, and proceeds from gold exports have contributed to the Thai Baht's rise to its highest level since 2021, prompting calls for central bank intervention to protect exports and tourism. Thais often convert dollar proceeds from gold sales into their local currency, boosting the Baht.

Impact on Thai Economy

The strong Baht is negatively impacting exports and tourism, which together account for 70% of the country's GDP. Exporters are already facing difficulties due to a 19% tariff imposed by the US on Thai products, and foreign tourist arrivals are declining due to the strong Baht and concerns about personal safety.

The Significance of Gold in Thailand

Gold holds significant cultural and historical importance in Thailand, often offered in Buddhist temples, and also a traditional means of saving and inheriting wealth. Demand for gold in Thailand grew by 13% last year, making it the only country to have experienced continuous growth in demand for four consecutive years since the start of the Covid-19 pandemic. According to one of Thailand's major gold dealers, approximately 70% of gold in Thailand is purchased online. The country relies heavily on gold imports, and demand is expected to continue to grow for the fifth consecutive year in 2025, reaching 53.7 tons.