High oil prices: exploring whether cutting fuel taxes can truly support diesel prices and the Oil Fund, or if the public still bears the heavy burden. Reducing excise taxes on fuel is a financial tool often used by the government to directly ease living costs, but this reduction is intricately linked to the "Oil Fuel Fund," which is currently deeply in deficit.
If the government announces a cut in excise tax on fuel—such as diesel—every 1 baht tax reduction could immediately lower pump prices by up to 1 baht.
In practice: the government usually reduces diesel tax by 1 to 5 baht per liter at a time.
Caution: Often the government does not pass the entire tax reduction fully to consumers but allocates part of it to "reduce compensation" from the Oil Fund to prevent the fund's deficit from worsening too quickly.
Excise tax and contributions to the Oil Fund are separate components.
Reducing taxes does not directly reduce the Oil Fund's existing negative debt but helps "slow down the outflow" of fund money if the government chooses to keep pump prices unchanged and uses the tax difference to offset compensation from the fund.
For example, currently the fund must pay 4 baht per liter in diesel compensation to keep retail prices at 33 baht.
If the government cuts tax by 2 baht but keeps the selling price at 33 baht, the fund's compensation drops to only 2 baht per liter.
Result: the Oil Fund's expenses will reduce (or its deficit will decrease) by about 2 billion baht per month (calculated from diesel consumption of about 60–70 million liters per day).
Cutting fuel taxes is a "double-edged sword."
The Ministry of Finance loses revenue: cutting diesel tax by 1 baht per liter causes the government to lose about 2 billion baht monthly.
Debt ceiling: losing tax income may force the government to increase borrowing or tighten other budget areas.
Summary table of approximate impacts
Item | Impact on fuel prices | Impact on the Oil Fund | Impact on government revenue |
Tax cut by 1 baht | Price reduction 0 to 1 baht | Compensation burden reduced by 2 billion baht/month | Revenue loss of 2 billion baht/month |
Tax cut by 5 baht | Price reduction 0 to 5 baht | Compensation burden reduced by 10 billion baht/month | Revenue loss of 10 billion baht/month |