Thailand’s E-Commerce Ecosystem: Understanding Business Formalization Within the Framework of Tax and Consumer Protection Regulations
Economic Research Institute for ASEAN and East Asia book publication, 2020
50 Pages Posted: 13 Mar 2020
Date Written: February 12, 2020
Thailand’s e-commerce industry is growing fast and evolving rapidly. Currently, the majority of e-commerce SME sales occur on a handful of foreign-headquartered platforms: Lazada, Shopee, Facebook, Instagram and LINE. Meanwhile, business formalization amongst e-commerce SMEs is low. A minority of e-commerce SMEs are tax compliant, and e-commerce cases make up a disproportionate number of all consumer protection cases.
Using interviews with industry participants and a literature review, this study outlines Thailand’s e-commerce ecosystem and its emerging regulatory framework. It analyses how e-commerce SMEs operate with regard to tax and consumer protection regulations. Using these insights, the study offers policy recommendations for the regulatory framework.
The analysis points to emerging structural weaknesses in the regulatory framework, exacerbated by simultaneous trends of globalisation and localisation. Four main issues are identified. First, e-commerce is changing rapidly and forcing regulators across the world to catch-up. Second, regulators in emerging markets cannot simply import regulation from technologically-advanced countries, as the industry is developing simultaneously in countries across the world. Third, localized use of global platforms is creating regulatory fracture, where gaps are opening up in regulation, creating opportunities for businesses to undertake regulatory arbitrage. Fourth, as e-commerce networks have ‘winner takes all’ characteristics, regulatory decisions made now are critical, as they will affect the industry in the future.
At a national level, Thailand’s regulators need to find strategic, regulatory coherence to streamline the plethora of regulations that apply to e-commerce and regulate effectively. Regulators need to understand the feedback loops in the industry, across regulators, businesses and consumers. Regulatory policies need to support the e-commerce ecosystem, ensuring that opportunities for regulatory arbitrage are rare and unprofitable.
Three policy recommendations are offered, in particular: increasing regulatory coherence to make it easier for businesses to comply; reducing regulatory arbitrage at international and national levels; and promoting competition in ‘winner takes all’ markets.
Keywords: e-commerce, tax, consumer protection, regulatory framework, regulatory arbitrage, regulatory fracture, competition, Thailand
JEL Classification: O33, P48
Suggested Citation: Suggested Citation