Thai Tax Strategy Revamp: VAT Hike, Income Tax Cuts Proposed

[snoop1130]

File photo for reference only

 

Thailand's Finance Minister, Pichai Chunhavajira, has unveiled a bold shift in the nation's tax strategy to strengthen state revenue and boost its economic position. At the heart of this plan is an increase in the value-added tax (VAT), from the current 7% to potentially 10%. This move aims to balance a reduction in corporate and personal income tax rates, thereby driving national development and realigning economic competitiveness.

 

The backdrop to this strategy includes the Organisation for Economic Co-operation and Development's new guidelines urging a 15% minimum corporate tax. Thailand's existing corporate rate stands at 20%, but a proposed cut to 15% is on the table to remain globally competitive. Speaking at the Sustainability Forum 2025, Pichai highlighted the necessity for these adjustments in light of international tax trends and workforce mobility challenges.

 

Reducing the current top personal income tax rate of 35% to a flat 15% is under discussion, aimed at attracting foreign talent and addressing the low tax base. Meanwhile, the VAT increase is positioned as a means to even out consumption tax disparities while broadening the revenue base, a move potentially beneficial to low-income groups if implemented judiciously. In many countries, the VAT ranges between 15% and 25%, suggesting Thailand could leverage this as a financial advantage.

 

Pichai also pointed out the potential for invigorating Thailand’s investment climate, particularly in green energy sectors, by aligning fiscal policies with social equality goals. With domestic and international interest on the rise, evidenced by investment projects totalling over 700 billion baht in the past nine months, the government anticipates reaching an investment value of 1 trillion baht by year’s end.

 

 

The Minister detailed the importance of synchronising monetary policy to maintain low interest rates while tackling inflation concerns—they forecast inflation to stay below 1% this year, providing scope for the central bank to potentially reduce interest rates.

 

Additionally, Pichai addressed the complexities of weakening the Thai baht, acknowledging the balancing act of retaining foreign investor confidence while managing currency value strategically.

 

He concluded by advocating for an increase in national savings to address challenges posed by Thailand’s ageing population, warning of potential risks if social security and provident fund savings dwindle quickly post-retirement. This comprehensive fiscal policy realignment aims not only to enhance economic growth but also to sustain it in the long term.

 

-- 2024-12-04

 

 

[ukrules]

I was wondering when they got around to the elephant in the room : VAT

 

[Dmaxdan]

1 hour ago, snoop1130 said:

Reducing the current top personal income tax rate of 35% to a flat 15% is under discussion, aimed at attracting foreign talent and addressing the low tax base.

Interesting. Perhaps they have finally realized that the new tax laws are potentially going to scare away wealthy foreigners. 

[NoDisplayName]

Yes, interesting.

 

The folks earning higher incomes, who actually hold the power to write the regulations, are going to lower the top income tax bracket.

 

They've already made capital gains on stock sales tax free.

 

The majority of the population, who don't make enough to pay income tax, will see VAT increased on all the noodles and inner tubes and plastic buckets they can currently afford.

[jaywalker2]

VAT is a regressive tax -- it favors the wealthy. So you lower the tax on the rich to 15 percent and to pay for it you raise the VAT, which hurts the poor and middle class the most since they have to spend most of their income to live. This is a blatant play by the rich and corporations to steal even more of the economic wealth of the country. And don't bother trying to say it will stimulate economic growth. This has already been tried in other countries (like the US) and they're all drowning in debt.

[lordgrinz]

So, tax the poor and middle-class more, and tax the Elite less.....I wonder who thought this up.

[KimchiCurry]

15%  flat tax is pretty good for personal income. Increasing VAT will damage the low class though. Why not increase VAT depending on the products (electronics, foods, etc...).

The increase of VAT from 7% to 10% must bring a <deleted> ton of money to be able to balance the decrease of corporate and personal income tax.

[Rolo89]

Should be a flat 10% tax like Bulgaria. 

 

The LTV working visa with it's flat tax of 17% is too high for what you get back in return.

[watchcat]

6 hours ago, lordgrinz said:

So, tax the poor and middle-class more, and tax the Elite less.....I wonder who thought this up.

 

Someone belonging to the elite class?

[KimchiCurry]

46 minutes ago, Rolo89 said:

Should be a flat 10% tax like Bulgaria. 

 

The LTV working visa with it's flat tax of 17% is too high for what you get back in return.

 

10-12% would be ideal but having 15% is fair. I can consider paying that instead of 25-30%. I can see myself living long term there with that taxation.

[redwood1]

10 hours ago, KimchiCurry said:

15%  flat tax is pretty good for personal income. Increasing VAT will damage the low class though. Why not increase VAT depending on the products (electronics, foods, etc...).

The increase of VAT from 7% to 10% must bring a <deleted> ton of money to be able to balance the decrease of corporate and personal income tax.

 

Very few Thai or farang  pay any income taxes......But Every one pays VAT rich or poor......So a raise in the VAT will bring in a tsunami  of new money....Thailand wont be missing the income taxes that almost nobody pays now...

[Yumthai]

13 hours ago, snoop1130 said:

Reducing the current top personal income tax rate of 35% to a flat 15% is under discussion, aimed at attracting foreign talent and addressing the low tax base.

That would be great for people living from US dividend. US-TH DTA allows 15% WHT on dividend that will come as a tax credit cancelling the proposed 15% PIT.

[chiang mai]

4 minutes ago, redwood1 said:

 

Very few Thai or farang  pay any income taxes......But Every one pays VAT rich or poor......So a raise in the VAT will bring in a tsunami  of new money....Thailand wont be missing the income taxes that almost nobody pays now...

It is not true that hardly anyone pays income tax at present, it is the third largest source of tax revenue, second only to VAT and Corporate tax.

 

 

[Celsius]

Wow what a scam.

 

Next. Doubling the marriage/extension deposits and lowering the price of elite visa.

[paddypower]

Borrocks......I just went to Makro yesterday and discovered that the import duty on wine had been reduced, resulting in a approx. 10%  decrease the retail prices (of wine, anyway). 

[Albo]

Is this the Thai way of producing growth in their economy? 🤣

 

This country is so hopelessly backward, corrupt and unproductive there's no fixing it.

 

The entire nation is swimming in debt, stagnant wages.

 

All this at the same time as government trying to drag street vendors, marginal businesses into the tax regime.

 

Giving money away to voters hugely popular with current government.

 

Thailand has the exact problem as US. Useless regulations, worthless bureaucrats, gatekeeping. Thailand should follow Trump and US lead and do the exact opposite. Reduce government spending, overhead, redundant jobs and bring in technology.

 

Instead, just raise taxes. It's idiocy

[connda]

14 hours ago, snoop1130 said:

Thailand's Finance Minister, Pichai Chunhavajira, has unveiled a bold shift in the nation's tax strategy to strengthen state revenue and boost its economic position. At the heart of this plan is an increase in the value-added tax (VAT), from the current 7% to potentially 10%

So their plan is to take from the poor and middle classes and give to the rich.  Grand plan!  But I'm not surprised.

[chiang mai]

Just now, Albo said:

Is this the Thai way of producing growth in their economy? 🤣

 

This country is so hopelessly backward, corrupt and unproductive there's no fixing it.

 

The entire nation is swimming in debt, stagnant wages.

 

All this at the same time as government trying to drag street vendors, marginal businesses into the tax regime.

 

Giving money away to voters hugely popular with current government.

 

Thailand has the exact problem as US. Useless regulations, worthless bureaucrats, gatekeeping. Thailand should follow Trump and US lead and do the exact opposite. Reduce government spending, overhead, redundant jobs and bring in technology.

 

Instead, just raise taxes. It's idiocy

Household or consumer debt is high but government or public debt is low, compared to many countries, less than 60% of GDP.

 

The idea behind closing tax loopholes is to make sure wealthy Thai's who evade tax offshore, pay their fair share, foreigners just got caught up in closing that loophole.

[Albo]

15 minutes ago, chiang mai said:

Household or consumer debt is high but government or public debt is low, compared to many countries, less than 60% of GDP.

 

The idea behind closing tax loopholes is to make sure wealthy Thai's who evade tax offshore, pay their fair share, foreigners just got caught up in closing that loophole.

 

I believe it's not 60 but 90% plus. Have a link? I might be thinking of total debt to be fair.

 

Debt under this government already blasting higher. I really thought taksin would restore sanity, but all I see is typical, small minded giveaways

 

Foreigners didn't - just get caught up. It's an easy exemption. More tax for farang with zero corresponding benefits

[chiang mai]

1 minute ago, Albo said:

 

I believe it's not 60 but 90% plus. Have a link?

Depends how you want to measure it, 56% or 61%, take your pick.

• Thailand Government debt accounted for 55.9 % of the country's Nominal GDP in Sep 2024, compared with the ratio of 55.8 % in the previous quarter.
• Thailand government debt to GDP ratio data is updated quarterly, available from Dec 1997 to Sep 2024.
• The data reached an all-time high of 56.0 % in Mar 2024 and a record low of 5.7 % in Mar 1998.

 

https://www.ceicdata.com/en/indicator/thailand/government-debt--of-nominal-gdp#:~:text=Thailand Government debt accounted for,Dec 1997 to Sep 2024.

 

 

[bamnutsak]

I think the VAT rate is 10%, but as of 1997 it has been temporarily reduced to 7%, and that reduction has been renewed annually since, by Royal decree.

 

Currently this temporary reduction runs through 30 Sep 2025.

 

 

[jaywalker2]

2 hours ago, paddypower said:

Borrocks......I just went to Makro yesterday and discovered that the import duty on wine had been reduced, resulting in a approx. 10%  decrease the retail prices (of wine, anyway). 

So now it's only 2 1/2 times the cost in its home country instead of 3 times. Great. That's why we have so many posts on this forum that go something like, "What's the cheapest wine I can buy without throwing up."

[jaywalker2]

1 hour ago, chiang mai said:

Depends how you want to measure it, 56% or 61%, take your pick.

• Thailand Government debt accounted for 55.9 % of the country's Nominal GDP in Sep 2024, compared with the ratio of 55.8 % in the previous quarter.
• Thailand government debt to GDP ratio data is updated quarterly, available from Dec 1997 to Sep 2024.
• The data reached an all-time high of 56.0 % in Mar 2024 and a record low of 5.7 % in Mar 1998.

 

https://www.ceicdata.com/en/indicator/thailand/government-debt--of-nominal-gdp#:~:text=Thailand Government debt accounted for,Dec 1997 to Sep 2024.

 

 

Theyre worried about Trump's tariffs now. If tariff's on Thai exports go up anywhere from 10-25 percent, the export market will be crushed. Corporate profits will plunge and government revenues will follow suit. And they can't stimulate domestic consumption anymore because of the debt burden borne by the middle and lower classes. They should be thinking about strategies to ameliorate the wealth gap in order to stimulate broad-based consumption but of course that's untouchable so all they can think about is how to attract more "foreign investment."

[Isaan sailor]

Thailand has more than a few economic problems.  Baht slowly rising from foreign inflows.  This affects tourism and exports.  When you compare Baht to Vietnam Dong, you see the difference.

[chiang mai]

20 minutes ago, jaywalker2 said:

Theyre worried about Trump's tariffs now. If tariff's on Thai exports go up anywhere from 10-25 percent, the export market will be crushed. Corporate profits will plunge and government revenues will follow suit. And they can't stimulate domestic consumption anymore because of the debt burden borne by the middle and lower classes. They should be thinking about strategies to ameliorate the wealth gap in order to stimulate broad-based consumption but of course that's untouchable so all they can think about is how to attract more "foreign investment."

I doubt seriously that Thailand is concerned about US import tariffs, the US is only around 16% of Thai exports.

[redwood1]

2 hours ago, chiang mai said:

Household or consumer debt is high but government or public debt is low, compared to many countries, less than 60% of GDP.

 

The idea behind closing tax loopholes is to make sure wealthy Thai's who evade tax offshore, pay their fair share, foreigners just got caught up in closing that loophole.

 

Hey I will buy you a happy meal the day the very very well off Thais or the mega rich Thais start to pay any income taxes in Thailand....

[chiang mai]

Just now, redwood1 said:

 

Hey I will buy you a happy meal the day the very very well off Thais or the mega rich Thais start to pay any income taxes in Thailand....

Hey, I'll buy you a happy meal, the day you start to understand what the  rest of us are talking about.

[jaywalker2]

22 minutes ago, chiang mai said:

I doubt seriously that Thailand is concerned about US import tariffs, the US is only around 16% of Thai exports.

That's all they've been talking about. Do you read the news? It's almost 17 percent, first of all, worth almost $50 billion, which is on par with the amount of tourist revenue they generate. Even that percentage is misleading because that's only direct exports. It doesn't count exports to other countries that are used to make products that end up being exported to the US. Moreover, tariffs would not just affect Thai exports. They would also further accelerate imports from China into the Thai market, which are already harming local businesses.

[chiang mai]

14 minutes ago, jaywalker2 said:

That's all they've been talking about. Do you read the news? It's almost 17 percent, first of all, worth almost $50 billion, which is on par with the amount of tourist revenue they generate. Even that percentage is misleading because that's only direct exports. It doesn't count exports to other countries that are used to make products that end up being exported to the US. Moreover, tariffs would not just affect Thai exports. They would also further accelerate imports from China into the Thai market, which are already harming local businesses.

The country does many things poorly but the one thing it does extremely well is it finds new markets when the old ones dry up. That's especially true of tourism where they move from country to country and attract visitors.

 

I expect the same will be true of exports also.

[Phillip9]

1 hour ago, chiang mai said:

I doubt seriously that Thailand is concerned about US import tariffs, the US is only around 16% of Thai exports.

 

ONLY???  16% makes the US by far the largest export market.  Second place is China at 12%.