Thailand plans to use blockchain for VAT refunds

Starting November 28, foreign tourists in Thailand will be able to claim VAT refunds via an application. The Finance Ministry is currently creating a blockchain-based VAT refund service. It is believed that this service will help to speed up the process of getting VAT refunds. This is because details of the purchases tourists make will immediately be shared with the Customs Department and the Revenue Department once the shops feed that data into the system. The Finance Ministry has signed a memorandum of understanding (MoU) with Krung Thai Bank, which will apply blockchain technology in three pilot projects.

Tourists who will be able to claim VAT refunds using the new application will have to indicate how they want to receive their refund - for example through WeChat or a credit card. It is estimated that about 2 million tourists make purchases in Thailand, which amount to about 50 billion baht annually. Out of the total figure, about 200,000 tourists make a VAT refund claim each month. It is also estimated that 70% of those who make the refund claim are Chinese tourists who do not carry physical cash.

With the help of blockchain technology, the processes of document verification can be simplified. Currently, about 10 million sheets of paper are used annually for this process. Additionally, it can lower the cost of cash management while also reducing congestion at the VAT refund centers. It is expected that the blockchain-powered VAT system will be able to approve refund claims automatically in cases where the purchase amount is low. However, an official who commented on the issue did not specify the specific minimum amount.

Others Uses of Blockchain

This is not the only process where blockchain is being used in Thailand. Another use case involving the technology is in bond issuance, scripless savings, and letters of credit.

Currently, Thai citizens are able to download Bond Direct application that they use to buy savings bonds with values beginning at one baht. The first issuance of a savings bond via the app is scheduled to take place in May 2020. Using blockchain, people are able to access saving bonds subscriptions with ease, which helps to reduce the time it takes to issue scripless bonds; the process is cut back from 15 days to just 2 days.

The blockchain-based letter of credit (LC) issuance for electronic procurement is going to be streamlined to inspect collateral that is put up by bidders and build confidence about the security of collateral. Thailand is actively encouraging various departments and agencies to adopt the use of blockchain technology.

Use of Blockchain in Thailand

Thailand is actively exploring various use cases for blockchain technology. At the start of 2019, the Bank of Thailand announced a proof of concept project for the creation of an institutional-level central bank digital currency (CBDC). Various major banks such as Bangkok Bank, Standard Chartered, HSBC, Bank of Ayudhya, Krung Thai Bank, Thanachart, and Siam Commercial Bank, took part in the pilot project.

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