The agencies affirmed their ‘AA’ high-grade rating on the government’s long-term sovereign debt but pointed to lingering uncertainty about the split from the European Union.

While Britain and the EU have reached a transition deal, its implementation is conditioned on resolving thorny questions on the Irish border, the framework for a future commercial relationship and other matters, said S&P Global Ratings.

“In our opinion, uncertainty persists for businesses given that there is still a chance that the transition agreement may not come into force,” S&P said.

“The negative outlook reflects the risk of sustained economic weakness should merchandise and services exports from the UK lose access to key European markets, or should external financing diminish due to a loss of confidence in the economy’s prospects.”

While the British economy has proven “fairly resilient” since the June 2016 referendum on Brexit, “we project that the UK economy is likely underperform many of its advanced economy peers,” S&P said.

Fitch said the draft Brexit agreement in March meant that while the probability of a “disruptive exit from the EU has decreased markedly, it has not been removed completely.”

“Moreover, we believe that no single post-Brexit relationship model with the EU commands either majority parliamentary or popular support,” Fitch added. “This injects further uncertainty about the final outcome of the withdrawal negotiations.”

Fitch noted that the British economy grew more than expected in 2017 in spite of Brexit uncertainty, but predicted growth would slow in the short-term before picking up again in 2019 “on the assumption of the transition agreement being finalized.”

Some believe that financial years prior to when the new provisions go into effect are safe from transfer pricing assessment.

Others believe that the penalties are limited to penalties for failure to comply with transfer pricing reporting requirements.

These are all common misconceptions.

The changes are merely for keeping up with international standards and for increasing the efficiency of transfer pricing audit.

Firstly, these provisions simply modernise the income tax law by introducing internationally accepted transfer pricing concepts. These concepts already exist under double taxation agreements that Thailand has with other countries. A special time limitation for transfer pricing tax refunds is also provided to correspond with the nature of transfer pricing audits that tend to be longer than normal tax audits.

For example, company A in Thailand sells goods to company B in Japan at Bt110, which is above the ‘market price’ of Bt100. Under the current regulations, if the selling price used by company A is reduced to the ‘market price’ of Bt100, the current tax provisions don’t allow the revenue officers to adjust company A’s selling price to Bt100. So the difference of Bt10 is taxed in both Thailand and Japan.

With the specific transfer pricing provisions, revenue officers will have the power to reduce company A’s selling price to the market price of Bt100, and eliminate the double taxation.

Secondly, the specific provisions only introduce partial disclosure at the time of tax filing, and make both partial and full disclosures mandatory.

The submission of transfer pricing documentation is currently on a voluntary basis, and if and when requested by the revenue Officers. Taxpayers are not required to disclose any transfer pricing information at the time of tax filing.

But under the new provisions, taxpayers with annual turnover of more than 30 million baht will be required to submit high-level transfer pricing information when they file their taxes. The Revenue Officers will use this information to select audit targets based on risk.

In addition, larger enterprises will also be required to disclose detailed information on their transfer pricing practices, if and when requested. Revenue officers will use this information to determine whether taxpayers have complied with transfer pricing rules.

Since these reporting requirements will be mandatory, failure to accurately disclose information will result in a penalty of up to Bt 200,000.

As for the second misconception, those who believe that prior years are safe from transfer pricing assessment will be in for a surprise.

Revenue officers will still be able to perform transfer pricing assessment on financial years completed before, as well as after, the specific provisions go into effect.

They will apply the general provisions to the former, and the specific provisions to the latter.

After the deadline for tax filing in May 2018, taxpayers with December year-end, for example, will still need to make sure their transfer pricing practices for financial years from 2013 onwards are appropriate, as the statute of limitation for tax audit is five years.

Lastly, compliance involves more than reporting. In addition to complying with reporting requirements, taxpayers still need to comply with transfer pricing rules.

And incorrect transfer pricing practices will still result in hefty additional tax payments, and penalties.

Some taxpayers may decide not to disclose transfer pricing information mistakenly believing that their risk is limited to Bt200,000, which may be less than the cost of preparing the information. Others may decide to disclose the information solely to avoid the Bt200,000 penalty, without being aware whether their transfer pricing practices are correct.

These taxpayers should think twice before adopting such strategies. Remember that the risk is not limited to a Bt200,000 penalty for failure to disclose transfer pricing information. Incorrect transfer pricing practices will incur far more severe tax costs, regardless of whether the reporting requirements have been met.

Taxpayers need to consider the full extent of the transfer pricing rules and regulations and invest in their time and resources accordingly.

Contributed by PEERAPAT POSHYANONDA, Partner and VASOONTAREE CHANYATIPSAKUL, Manager, PwC Tax & Legal, Thailand

The markets have expected global interest rates to rise this year as major central banks normalise their ultra-low interest rates, Veerathai said in response to rising yields of the US Treasury on Thailand‘s financial market.

There is also a plenty of liquidity in the Thai market, he said.

Regarding the strength of Thai banks, he said he did not worry about their ability to repay their foreign loans. It is the normal way they manage their assets by borrowing foreign funds to finance foreign direct investment projects made by Thai companies.

Moreover, global interest rates are unlikely to increase much, he added.

In March 2017, diesel use was recorded at 68.9 million litres per day.

Meanwhile, daily base diesel consumption was 1.287 million litres in March, lower than the 1.81 million litres in the same period of last year, due to the switch of some manufacturers and marine vessel operators to other types of cheaper fuel.

In the first quarter of this year, daily diesel consumption averaged at 67 million litres, up 3.9 per cent from the same period of last year, while petrol averaged 30.8 million litres, up 4.7 per cent from the same period of last year.

 Up to Bt214.3 billion of this amount would be spent on getting the high-speed service up and running, with Bt4.99 billion put to compensation for land expropriation covering 400 rai along the route and the rest allocated to the development of commercial areas around the main station, Chulathep Chittasombat, director of the centre that oversees railway maintenance projects, said at a press conference yesterday.

Chulathep said the two infrastructure projects would equip the flagship economic zone with the rail transport it needs for freight and people.

The terms of reference for the high-speed train project – connecting the Don Mueang, Suvarnabhumi and U-Tapao airports – are being drafted on expectation for bidding to be opened this year and construction to start in 2019.

“The plots of land planned for expropriation will account for only 5 per cent of the total construction area, of which 95 per cent will cover the existing rail route,” Chulathep said.

The Office of Transport and Traffic Policy and Planning is conducting a feasibility study for construction of an Inland Container Depot (ICD) in Chachoengsao province to facilitate exports. Inspection and packing would be done before the goods reach ports in the EEC area.

Regarding the second phase of the high-speed train and double-track rail services that will connect industrial estates in the EEC, the SRT is requesting for an additional funds to hire consultants, at about Bt200 million for each project, to conduct studies and project design.

The bidding terms for the high-speed project will be announced in July on expectation for bid submissions in February next year, with the bid winner likely to be announced in May next year. The high-speed project’s full services would start in 2023.

An anonymous source from Bangkok Mass Transit System Plc said that the company is interested in the high-speed project and would assess whether to proceed with a bid based on factors such as expense, the cost of funding, projected income and the break-even period.

“Once the bidding conditions come out, the figures must be taken for evaluation and discussions will be held with a partner on the return on investment. If it’s satisfactory, all the parties will join up in a bid,” the source said.

Piyasvasti Amranand, the chairman of PTT Plc, said that the board had approved PTT Group’s planned purchase of the TOR for the high-speed project with the aim of a conducting a feasibility study into it. No consideration yet had been to given to company’s seeking of a partner for joint investment.

Prasert Marittanaporn, director of CH Karnchang Plc, said that the group was interested in joining the bidding for the high-speed train, citing its readiness to proceed in construction business.

“The company is ready and interested to bid. But the source of financing may need to be given more consideration, given the relatively high investment,” Prasert said. “It could be investment on our own or a joint investment with a partner. We have had some talks with potential partners.”

Separately, Deputy Transport Minister Pailin Chuchottaworn yesterday said that, after having chaired a brainstorming session on the creation of an organisation for the management of the Thailand-China high-speed rail service, eight financial advisers registered with the Securities and Exchange Commission were invited to bid for a model of establishment of such an organisation. The deputy minister cited the advisers’ expertise in financial management and real estate development.

Initially, the organisation may be established as a company to be listed in the stock exchange for fundraising and more management flexibility, he said. It must be a newly established unit owned and controlled by the public sector, independent from the SRT, which owns the high-speed train project, the deputy minister added.

“These financial advisers will present the model of the organisation within one month and then, a subcommittee will select the best proposal,” Pailin said. “The winner will be assigned as the project’s financial adviser in return as these financial advisers will conduct the study for us at no cost. The organisation is expected to be set up this year.”

The eight financial advisers are Kasikornbank, Siam Commercial Bank, United Overseas Bank (Thai), Finansa Securities, RHB, Ploenchit Capital, Avantgarde Capital, and PricewaterhouseCoopers FAS

Compared to 2016, the nominal increase adjusted for exchange rates was 3.7 per cent.

Property-casualty insurance set the tone last year. With a growth rate of 5 per cent, it grew almost twice as fast as life insurance (2.8 per cent), but also recorded the largest increase since 2012. Nevertheless, the growth discrepancy between the regions remains striking.

While premiums in Western Europe, for example, rose by a meagre 2 per cent, Asia (excluding Japan) soared by 10.2 per cent.

The top global performer last year was India, with bumper growth of above 30 per cent.

Asia, excluding Japan, also had another strong year in life, with premiums surging by almost 14 per cent in 2017.

Since the financial crisis, insurance premiums in the region have more than tripled.

With approximately €60 billion in additional premiums in life worldwide, around 80 per cent were attributable to the Chinese market.

Thailand showed robust growth of 6.6 per cent in 2017 and is now the seventh largest life market in the region, ahead of much bigger Indonesia.

In both lines combined, last year’s global premium growth totalled just under €130 billion.

Asia, excluding Japan, accounted for 76 per cent of the increase, with China accounting for more than two thirds of this.

“Asia is setting the pace for insurance markets, in particular in life,” said Michael Heise, chief economist of Allianz. “The past development is nothing less than amazing. This is part of a broader trend. The region succeeded in transforming high growth rates into mass wealth.

“The new Asian middle class is now not only driving insurance markets, but many consumer markets. Asian savers and shoppers are the growth engine for the world economy,” Heise said.

Allianz Research expects insurance markets to continue to recover, with premium growth forecast to reach around 6 per cent in the next decade.

This upturn primarily reflects the return of the global economy to normal growth and inflation rates.

Growth expectations for Asia, excluding Japan, are notably higher. The region should achieve growth of almost 11 per cent per annum over the next decade. At the end of the 2020s, around 40 per cent of global premium income should be written in the region.

Ten years ago, this figure was around 10 per cent and China is due to overtake the US as the largest insurance market.

“Global insurance markets are undergoing fundamental changes,” said Kathrin Brandmeir, economist at Allianz Research. “However, from our point of view, this disruption also offers great opportunities.

“With the new technologies, insurance cover can be made accessible and tangible for more people, and insurance products can become more attractive.”

Brandmeir said: “If we succeed in getting customers so enthusiastic about insurance that they would again spend as much of their income on insurance cover as before the crisis, global premiums could be about €1 trillion higher at the end of the next decade than in our baseline scenario.”