Thai defence industry hampered by tax regulations, says manufacturer
The founder of Thailand's premier armoured-vehicle manufacturer has called for urgent regulatory reform to address obstacles facing the country's defence industry.
Nopparta Kulhiran, founder of Chaiseri Metal & Rubber and known as "Madame Tank", says current regulations, including high taxes on raw materials and VAT (value-added tax), are severely hampering the sector's competitiveness.
"Thailand's defence industry faces numerous challenges, particularly regarding production costs that put us at a disadvantage compared with foreign competitors," she said.
The disparity in taxation presents a significant challenge. While complete imported armoured vehicles enter Thailand duty-free (HS CODE 8710.00.00), domestic manufacturers face a 5% import tax on steel for bulletproof and explosion-proof vehicles, along with 12% VAT and additional anti-dumping duties on hot-rolled steel.
Engine and transmission components pose another hurdle. "We must import these from the United States, requiring multiple approvals. We need an export licence from the US, an import licence here, a contract with the military, and Ministry of Defence approval for importation," Nopparat explained.
She elaborated on the taxation burden: "Upon arrival, we face a 10% engine tax, 30% suspension or transmission tax, plus various other import duties. Meanwhile, finished products from abroad enter tax-free – they don't even pay VAT. How can Thailand's defence industry compete under these conditions?"
The Board of Investment's policies have also come under scrutiny. Despite a decade of applications, Nopparat's company has struggled to secure investment promotion for armaments. While the BOI now offers support, she argues it comes too late for completed projects.
She expressed concerns about the BOI's current approach to foreign investment in the defence sector.
"Investment promotion should prioritise science and modern technology. Vehicle repairs and weapons maintenance are already overseen by government and military units. Any investment promotion must benefit our nation and people, not simply open doors for foreign competition against existing domestic industries," she said.
When asked about the industry's economic impact, she used a mountain metaphor: "New technology is like being at a mountain's peak – when developed domestically, benefits flow downward like water. The whole supply chain benefits: raw-materials suppliers, labour force, and related industries. This creates far more value than 100% imports that pay no taxes."
Despite the government's recognition of the defence industry's potential, Nopparat believes that progress has been limited.
"Thailand possesses capability in this sector, which is critical to national security and self-reliance. The government must move quickly to resolve existing obstacles," she urged.
Regardless of these challenges, Chaiseri Metal & Rubber maintains its market leadership through agility and customer service, she claimed. "We survive because we are agile," she said.
"Our customers find us accessible and responsive. When problems arise, we address them immediately. There are not multiple layers of bureaucracy. Getting that level of service with foreign purchases is impossible. We adapt to our customers' needs. That is our strength," she said.
