Windfall Taxation of Oil Refining and Fuel Trading Businesses in Thailand: Policy, Legal, and Economic Considerations

Abstract

This in‑depth academic article aims to analyze the theoretical foundations, appropriateness, and obstacles in applying the windfall tax instrument to Thailand’s fuel oil production (refining) and marketing businesses. Employing documentary research methodology, the study is framed by economic rent taxation theory, Rawlsian social equity theory (1971), and international implementation experiences, particularly from the United Kingdom and the European Union. It also examines the structure of Thailand’s oil market, the financial position of the Oil Fuel Fund, excess gross refining margins (excess GRM), and the legal limitations of the Petroleum Income Tax Act B.E. 2514 (1971). The findings reveal that Thai refiners and fuel marketers show signs of unusually wide refining margins that may indicate the possibility of excess returns from geopolitical factors (the Russia‑Ukraine war and the Middle East crisis), pushing market GRM to 16‑17 baht/litre (April 2026). Meanwhile, the Oil Fuel Fund recorded accumulated liabilities of 56.229 billion baht (April 2026), with daily diesel subsidies exceeding 1.47 billion baht. Nevertheless, implementing a windfall tax faces three major obstacles: (1) technical inappropriateness of using GRM directly as the tax base, (2) No specific legal framework, and (3) energy security risks from production curtailment and increased refined‑product imports. This article introduces an original contribution: the 4‑Pillar Windfall Tax Policy Framework for Thailand, comprising (1) recalibrating the tax base using Net Refining Margin instead of GRM, (2) a three‑dimensional automatic trigger mechanism, (3) a burden‑sharing mechanism between stakeholders, and (4) a checks‑and‑balances mechanism to mitigate trade distortion. Policy recommendations include amending the Petroleum Income Tax Act, drafting an Excess Energy Profits Tax Act, and enhancing transparency in Oil Fuel Fund governance.