Sharp Cut In Thai Corporate Tax Mulled, VAT Could Go Up

[george]

Sharp cut in corporate tax mulled

By Business Desk

The Nation

Published on November 18, 2010

Finance Ministry officials are tweaking a package of tax reforms, with the likelihood that the corporate-income-tax rate will be cut aggressively from 30 per cent to 18 per cent in return for an increase in value-added tax.

Satit Rungkasiri, director-general of the Revenue Department, said at a seminar yesterday hosted by Siam Rath that the proposed reform package would be presented to Finance Minister Korn Chatikavanij early next year.

One proposal is to increase VAT from the current rate of 7 per cent, he said, adding that every percentage-point VAT increase would increase government revenue by Bt60 billion.

Corporate and personal income tax would be reduced, with every percentage-point cut slashing revenue by Bt6 billion.

Satit said corporate income tax might be cut to 18 per cent from the current 30 per cent, while the highest progressive rate of personal income tax would be lowered to 25 per cent from 37 per cent.

Local and foreign corporations have complained that Thailand’s corporate tax rate is too high when compared with those in other countries in the region. Many business leaders have therefore proposed a cut to make the Kingdom more attractive to foreign companies.

Thailand recently advertised itself as a destination for the regional headquarters of multinational firms, but only a few have submitted proposals so far. Under that package, expatriates working for a regional HQ are also subject to lower individual income tax.

According to KPMG’s 2010 tax survey, global average corporate income tax stands at 24.99 per cent. However, in Southeast Asia, the rates of Thailand and the Philippines are the highest at 30 per cent, compared with the 17 per cent imposed by Singapore.

Satit also said there was an option partially to remove tax privileges granted by the Board of Investment. The ministry could even completely abandon the BoI’s tax incentives.

At present, to attract new investment, the BOI extends the maximum eight-year corporate-income-tax exemption on approved investment projects. Some tax privileges also cover the import of machinery.

The ministry has also studied introducing a law to impose a “Tobin” tax on capital inflows.

Satit said such a tax was not necessary at this stage, but it was best for the government to have an additional tool at the ready to stem the flow of capital.

Meanwhile, Pongpanu Svetarundra, director-general of the Excise Department, said he wanted to impose a tax on gambling such as government lotteries and horse racing, as well as increase the tax rate on cigarettes and alcoholic beverages.

He said the Finance Ministry should collect tax based on the retail price of cigarettes, instead of on ex-factory prices.

While this would boost the tax rate, it would also help reduce smoking and therefore protect the nation’s health, he added.

-- The Nation 2010-11-18

[nong38]

Earlier this year and certainly this side of August the rate at which VAT is impossed would remain at its current rate for at least another 2 years, was someone not listening? Also a VAT rise hits all members of society the same, it has a bigger effect on people on small incomes ans now we learn that income tax for the higher paid may be dropped from 37 to 25 % Which makes it sound like the richer will be getting richer and the poor poorer and that is backed up by the drop in corporation tax from 30 to 18 which does that effect the poor or the rich? How on earth do you think you can reconsile the Reds grievances fort a fairer society with this proposal? I hope its just a proposal and that its shelved PDQ for all Thailands sake

[Khun Jean]

If corporate tax goes to 17% i will move business to Thailand and will have a few Thai employees with a good salary. I guess many more will consider it.

VAT seems a perfect tax for Thailand with so many people earning money but contributing nothing.

As long as food and other necessities and luxury items are taxed differently i not see a problem with it.

Edited November 18, 2010 by Khun Jean

[Pib]

And VAT don't increase the cost of food, necessities, and luxury items??!! Guess I been shopping at all the wrong stores, shops, noodle stands, etc., as VAT directly "or indirectly" increases the final cost of all items.

[asiawatcher]

There is not much point in cutting tax to attract overseas investment by companies when the 'system' to remain here is simply diabolical. Rethink that status and you may have a winning formulae.

[phaethon]

Yes, the reason Singapore out-competes Thailand for investment is not the tax breaks but the fact that Sg is the least corrupt nation in SEA (and one of the three least corrupt in the world) .

Thailand - 78th out of 154

Still... the food's good.

[Khun Jean]

Yes, the reason Singapore out-competes Thailand for investment is not the tax breaks but the fact that Sg is the least corrupt nation in SEA (and one of the three least corrupt in the world) .

Thailand - 78th out of 154

Still... the food's good.

So Thailand is somewhere around the middle. Sounds very budhist to me.