Wage Hike In Thailand Worries Foreign Investors

[webfact]

Wage hike worries investors

By Wichit Chaitrong

The Nation

In seminar hosted by Asean TV , foreigners set agenda for the next govt while economic leaders claim they have clear plans to deal with major issues

Foreign investors are worried about the proposed increase in wages, the rising cost of electricity, widespread corruption and low education standards, and want the new government to start liberalising the service sectors.

Investors, both local and foreign, raised these issues at yesterday's "July 3 Election: Foreign Trade, Investment and Tourism" seminar hosted by The Nation and Asean-TV. Thanong Khantong, editor of Asean TV, moderated the forum.

An investor from India said electricity and labour cost a lot less in Indonesia, and expressed concerns about political parties promising an increase in minimum wages. Instead, he said, the government could help by reducing income tax.

Nandor G von der Luehe, chairman of the Joint Foreign Chambers of Commerce in Thailand, called on the government to liberalise service sectors and remove restrictions in the Foreign Business Act.

Finance Minister Korn Chatikavanij, meanwhile, said electricity in Thailand was cheaper compared to neighbouring countries with the exception of Indonesia, which has an abundance of fuel resources. However, he said a nuclear power plant was out of the question because there was far too much opposition and everybody was afraid of a nuclear crisis like the one Japan is suffering.

He added that Thailand had the advantage of being well placed geographically to become a logistics hub in the region, which would lower the cost for manufacturing sectors.

The Democrat Party also plans to further develop the Laem Chabang port in the East and link it to Burma's Dawei (Tavoy) port. "We have to look beyond what is available within our own borders," he said, as he ruled out the question of building new ports in the South, because it is a tourism hub.

Korn said if the Democrat Party wins it would introduce reforms in the tax system, like increasing property tax, which would allow cuts in other taxes. Korn also implied that value-added tax might also be increased because the current 7 per cent was very low. In addition, companies that are willing to increase minimum wage would be given tax rebates, he said, in reference to his party's election pledges to increase minimum wage by 25 per cent in two years "We're looking at a comprehensive tax package, not a specific one," he reiterated.

Korn added that if the next government ended up being led by the Democrat Party, then the Commerce Ministry would take care of the restrictions in the Foreign Business Act.

Olarn Chaipravat, chief economic strategist of Pheu Thai Party, meanwhile, has promised that his party would improve the education system in the next six years. The party plans to spend about Bt4 billion on providing Tablet PCs to about a million schoolchildren nationwide, and also aims to encourage parents to oversee their children's studies. These moves are aimed at solving the issue of the lack of skills in both foreign languages and mathematics among young children.

Olarn added that each university would be given Bt1 million as funding for training courses in order to help increase productivity, which should offset the high cost of labour as the party plans to raise the minimum daily wage to Bt300.

In addition, he said, corporate income tax would be cut to 23 per cent this year and 20 per cent in two years. "It's well thought out and quantified," he said, as he tried to allay the fear of rising wages.

Kasemsant Virakul, a senior member of Chart Thai Pattana's economic team, promised to allocate a bigger part of the budget to the National Anti-Corruption Commis-sion to fight corruption, as well as invest Bt1 trillion in mega-infrastructure projects.

Goanpot Asvinvichit, chief of Chart Pattana Puea Pandin Party's economic team, promised to work closely with the private sector to help increase productivity and earnings.

-- The Nation 2011-06-16

[Kilgore Trout]

the government could help by reducing income tax.

Wasn't there just an article saying that less than 50% of Thais pay income tax?

[Tywais]

the government could help by reducing income tax.

Wasn't there just an article saying that less than 50% of Thais pay income tax?

Probably fewer than that pay as you have to be earning more then 20k/month before tax liability comes into play except for perhaps businesses. And than of course those that have under table salaries.

[geriatrickid]

An investor from India said labour costs were cheaper in Indonesia. That says it all. Sorry Mr. indian investor, but not everyone wants to live in poverty just so you can be an Indian billionaire and live in a palace. Boo hoo. I feel for you. BTW maybe he should read TVF: http://www.thaivisa.com/forum/topic/475436-laid-off-indonesian-workers-protest-at-parliament-building/

I agree with Minister Korn that the 7% tax rate is too low. Another point or two will provide the tax revenues to pay for the programs the Democrats are promising. Increasing the property tax might impact some of the families that control a large part of Thailand's real estate. However, I expect that they would just pass the increases along to the tenants.

Edited June 16, 2011 by geriatrickid

[WeeGB]

"Encourage parents to oversee their children's studies ?" Probably 30-40 % of the parents in the village I live in can barely read and write Thai, and need a calculator to add two single numbers together. How on earth can such parental guidance solve the issue of the children's lack of foreign language and mathematical skills ? Tablet PCs are a waste of time and money, when the basic skills are ignored. Sounds good on paper though, but the reality is that most of the 4 Billion will find it's way into the hands of the greedy, and not the needy.

[Nisa]

the government could help by reducing income tax.

Wasn't there just an article saying that less than 50% of Thais pay income tax?

Probably fewer than that pay as you have to be earning more then 20k/month before tax liability comes into play except for perhaps businesses. And than of course those that have under table salaries.

What I don't get about these news stories is they never spell out what the current minimum wage is. As I understand it, 200 baht a day is typical for workers in Bangkok but I believe the minimums for a factory worker may be more. They mention raising the wage by 25% but that doesn't compute to 300 baht if 200 is the minimum. And what of over time? Many jobs require a 12 hour workday and/or working up to 7 days a week.

[moe666]

The Republicans have arrived in Thailand tax cuts for the wealty and the shaft for everyone else. Let people earn a decent wage and make a living and you mister investor will still make money but not as much as your greedy soul would like.

[Ned]

When you're in a race to the bottom in the world of low wage countries, where you're competing to attract investors to your low wages any grants of higher pay to the masses will lead to your destruction. No alternative now but to import millions and millions more 100 baht a day Burmese to keep the wheels of industry turning and the profits pouring in. The tens of millions of low/ unskilled Thais can work for Burmese wages or can drift back to the bush and forage for sustenance there.

[bushwacker]

Hmmm ... if the business owners are complaining about the high cost of doing business in Thailand, I wonder what the inflation impact will be on them with a 25% salary increase in 2 years.

[ESB7]

"Encourage parents to oversee their children's studies ?" Probably 30-40 % of the parents in the village I live in can barely read and write Thai, and need a calculator to add two single numbers together. How on earth can such parental guidance solve the issue of the children's lack of foreign language and mathematical skills ? Tablet PCs are a waste of time and money, when the basic skills are ignored. Sounds good on paper though, but the reality is that most of the 4 Billion will find it's way into the hands of the greedy, and not the needy.

Sounds a bit like Tower Hamlets, Haringay and Brixton to me

[WeeGB]

"Encourage parents to oversee their children's studies ?" Probably 30-40 % of the parents in the village I live in can barely read and write Thai, and need a calculator to add two single numbers together. How on earth can such parental guidance solve the issue of the children's lack of foreign language and mathematical skills ? Tablet PCs are a waste of time and money, when the basic skills are ignored. Sounds good on paper though, but the reality is that most of the 4 Billion will find it's way into the hands of the greedy, and not the needy.

Sounds a bit like Tower Hamlets, Haringay and Brixton to me

Many a true word........ The saddest thing for me about this whole election fiasco, is that in reality none of the parties give a dam_n about raising the standards for the millions of poor, uneducated people in this country. It's all about getting their snouts in the trough, creating power for themselves and their cronies, and maintaining that power at any cost. They all talk the talk, but none of them dare walk the walk.

[ableguy]

the government could help by reducing income tax.

Wasn't there just an article saying that less than 50% of Thais pay income tax?

I read only 15% pay income tax. Ref the wage hikes it was announces last week the 15,000 baht per month guarantee for college grads only applies to people who get employed by the government, it is voluntry only in the private sector, another great scam.

[dutchweller]

the government could help by reducing income tax.

Wasn't there just an article saying that less than 50% of Thais pay income tax?

Probably fewer than that pay as you have to be earning more then 20k/month before tax liability comes into play except for perhaps businesses. And than of course those that have under table salaries.

What I don't get about these news stories is they never spell out what the current minimum wage is. As I understand it, 200 baht a day is typical for workers in Bangkok but I believe the minimums for a factory worker may be more. They mention raising the wage by 25% but that doesn't compute to 300 baht if 200 is the minimum. And what of over time? Many jobs require a 12 hour workday and/or working up to 7 days a week.

There is no such thing as Over time in Thailand by my understanding.

You work as long as required you will NEVER be monetarily rembursed for the over time but you can accumulate this occurred for vacation time.

This is a Massive pain for mangers of employers when it comes to staff retention and turn over.

As most employees must give 30 days notice of termination.

So what most do is give notice and take vacation effective immediately.

leaving managers with vacant posts and unable to begin the interview process to fill them until the previous employee has finished his vacation and officially ended his employment.

All this seems to be because it is much much easer for the Bean counters and the owner to fix the monthly salary outgoing for the business.

but on the coal face it is a dammed Nightmarish especially with company with heavy turnover and large amounts of employees.

I have work in some where the budget was 27 but actually opperational were less than 17..

With regards to the Thais paying Tax I would gamble well less than 50% pay tax.

you only have to think how many street vendors or market stall owners are paying tax and I can Guarantee you absolutely 0 are lining up at the tax office to pay tax on the earnings.

and before you say well most earn below 20 000 so don't need to don't joke yourself I personally know 3 owners taking home almost 80 000 p/m each profit from their 3 market stalls.

in fact theay are doing so well all 3 lady's no longer even work in their own stalls and just employ staff @ 200 THB per day and come collect the money at the end of the day.

No tax paid for staff or profits taken.

And this is absolutely Normal with 99% of the stalls

Its us Farangs who are the Mugs paying all the tax for this country in fact I would like to bet that if you calculated all the tax paid by Farangs and all the tax paid by Thais Farang/Foreign employee income tax would be almost equal if not more that what Thais pay this is with what 50:1 Thai to foreigner in Thailand.

[exbelg]

privatisation of electricity companies is always a bad move, for the common people, as they will end up paying much more than before for no apparent reason than the shareholders and the enourmous salaries and bonus for the CEO and other, if it would become a private company

here we go again to make thailand yet another hub with low education

the only hub thailand is, is one for sexpats but if things continue as it is, with thai and russian maffia, it even might lose attraction to other countries in that perspective

[davejonesbkk]

this thread is right below 'Thai Workers Need To Upgrade Skills' thread at the moment, lol

[Orac]

"Korn also implied that value-added tax might also be increased because the current 7 per cent was very low."

So there is a plan to reduce income tax which is paid by the relatively well off and possibly increase value added tax which is a regressive tax a therefore tends to effect the poorer more.

Surely at this stage, a few weeks before a general election, any plan to increase sales taxes should be made clearer to the voting public??

[arthurwait]

the government could help by reducing income tax.

Wasn't there just an article saying that less than 50% of Thais pay income tax?

Probably fewer than that pay as you have to be earning more then 20k/month before tax liability comes into play except for perhaps businesses. And than of course those that have under table salaries.

What I don't get about these news stories is they never spell out what the current minimum wage is. As I understand it, 200 baht a day is typical for workers in Bangkok but I believe the minimums for a factory worker may be more. They mention raising the wage by 25% but that doesn't compute to 300 baht if 200 is the minimum. And what of over time? Many jobs require a 12 hour workday and/or working up to 7 days a week.

There is no such thing as Over time in Thailand by my understanding.

You work as long as required you will NEVER be monetarily rembursed for the over time but you can accumulate this occurred for vacation time.

This is a Massive pain for mangers of employers when it comes to staff retention and turn over.

As most employees must give 30 days notice of termination.

So what most do is give notice and take vacation effective immediately.

leaving managers with vacant posts and unable to begin the interview process to fill them until the previous employee has finished his vacation and officially ended his employment.

All this seems to be because it is much much easer for the Bean counters and the owner to fix the monthly salary outgoing for the business.

but on the coal face it is a dammed Nightmarish especially with company with heavy turnover and large amounts of employees.

I have work in some where the budget was 27 but actually opperational were less than 17..

With regards to the Thais paying Tax I would gamble well less than 50% pay tax.

you only have to think how many street vendors or market stall owners are paying tax and I can Guarantee you absolutely 0 are lining up at the tax office to pay tax on the earnings.

and before you say well most earn below 20 000 so don't need to don't joke yourself I personally know 3 owners taking home almost 80 000 p/m each profit from their 3 market stalls.

in fact theay are doing so well all 3 lady's no longer even work in their own stalls and just employ staff @ 200 THB per day and come collect the money at the end of the day.

No tax paid for staff or profits taken.

And this is absolutely Normal with 99% of the stalls

Its us Farangs who are the Mugs paying all the tax for this country in fact I would like to bet that if you calculated all the tax paid by Farangs and all the tax paid by Thais Farang/Foreign employee income tax would be almost equal if not more that what Thais pay this is with what 50:1 Thai to foreigner in Thailand.

It's 17% of Thais pay income tax IIRC.

There is overtime, it's all in a thread last month. Over 48 hours again IIRC. How many adhere to it is another matter.

Notice, if they are from the countryside or from a neighbouring countr, they just disappear overnight and don't even bother to pick up the wages.

[whybother]

"Korn also implied that value-added tax might also be increased because the current 7 per cent was very low."

So there is a plan to reduce income tax which is paid by the relatively well off and possibly increase value added tax which is a regressive tax a therefore tends to effect the poorer more.

Surely at this stage, a few weeks before a general election, any plan to increase sales taxes should be made clearer to the voting public??

Usually, the richer you are, the less tax you pay (per dollar "earned"), because you either work out how to hide it, or you work out how to get deductions.

The rich spend more, so by increasing a consumption tax, you are taxing the rich as much as you are taxing the poor.

By increasing the income tax, all you are doing is making the poor and middle income workers pay more, because the rich know how to hide their income.

As far as making things clearer to the voting public, "that can wait until after the election" (K Yingluck).

[rgs2001uk]

[

There is no such thing as Over time in Thailand by my understanding.

The next Thai you meet ask them, tam o plae wa arai?

By my understanding tam o is the Thai way of saying overtime.

[dutchweller]

It's 17% of Thais pay income tax IIRC.

There is overtime, it's all in a thread last month. Over 48 hours again IIRC. How many adhere to it is another matter.

Notice, if they are from the countryside or from a neighbouring countr, they just disappear overnight and don't even bother to pick up the wages.

67 500 000 (population of Thailand) = 70.3% (of working age) = 47 452 500 - (unemployed) 1.2% = remainder 41 758 200 - 83% who don't pay tax = 7 098 894

hmm.... so roughly 7 million Tax paying Thais are supporting the other 60 million Non taxpaying Thais..

Of this 7 million I would not like to bet on how many are not declaring 100% of income.

1.5 Million Foreign regesterd working in Thailand all paying Tax...

I call that a bum deal..

[Orac]

"Korn also implied that value-added tax might also be increased because the current 7 per cent was very low."

So there is a plan to reduce income tax which is paid by the relatively well off and possibly increase value added tax which is a regressive tax a therefore tends to effect the poorer more.

Surely at this stage, a few weeks before a general election, any plan to increase sales taxes should be made clearer to the voting public??

Usually, the richer you are, the less tax you pay (per dollar "earned"), because you either work out how to hide it, or you work out how to get deductions.

The rich spend more, so by increasing a consumption tax, you are taxing the rich as much as you are taxing the poor.

By increasing the income tax, all you are doing is making the poor and middle income workers pay more, because the rich know how to hide their income.

As far as making things clearer to the voting public, "that can wait until after the election" (K Yingluck).

I fail to see how the poor and middle income workers would be worse off with an increase in income tax if, as stated earlier in this thread, ppl earning under 20k a month do not pay tax unless there is some unannounced plan to lower the starting amount for tax.

As for the consumption tax, this is a regressive tax which impacts more on poorer people because it takes a greater proportion of their income.

I am not sure why you are quoting K Yingluck on this as this is a statement from Korn who is in a different party and, a person with major influence on the Democrats tax policies. I think the thai people would like to hear more about this intended policy of reducing taxes on the rich and increasing them for the poor.

[whybother]

"Korn also implied that value-added tax might also be increased because the current 7 per cent was very low."

So there is a plan to reduce income tax which is paid by the relatively well off and possibly increase value added tax which is a regressive tax a therefore tends to effect the poorer more.

Surely at this stage, a few weeks before a general election, any plan to increase sales taxes should be made clearer to the voting public??

Usually, the richer you are, the less tax you pay (per dollar "earned"), because you either work out how to hide it, or you work out how to get deductions.

The rich spend more, so by increasing a consumption tax, you are taxing the rich as much as you are taxing the poor.

By increasing the income tax, all you are doing is making the poor and middle income workers pay more, because the rich know how to hide their income.

As far as making things clearer to the voting public, "that can wait until after the election" (K Yingluck).

I fail to see how the poor and middle income workers would be worse off with an increase in income tax if, as stated earlier in this thread, ppl earning under 20k a month do not pay tax unless there is some unannounced plan to lower the starting amount for tax.

As for the consumption tax, this is a regressive tax which impacts more on poorer people because it takes a greater proportion of their income.

I am not sure why you are quoting K Yingluck on this as this is a statement from Korn who is in a different party and, a person with major influence on the Democrats tax policies. I think the thai people would like to hear more about this intended policy of reducing taxes on the rich and increasing them for the poor.

Consumption tax hits richer people too, because they can't avoid paying it, whereas they can usually avoid declaring income. They also spend a greater amount (not proportion) of their income compared to lower income earners. Lower income earners may also be better off because the government has more tax income to spend on social security issues.

But, there are pros and cons for all tax measures, so there is no real point on us thrashing it out here.

I am also sure that the Thai people would like to hear more about all the policies, but some political parties seem to think it's ok to wait until after the election for that.

[Orac]

"Korn also implied that value-added tax might also be increased because the current 7 per cent was very low."

So there is a plan to reduce income tax which is paid by the relatively well off and possibly increase value added tax which is a regressive tax a therefore tends to effect the poorer more.

Surely at this stage, a few weeks before a general election, any plan to increase sales taxes should be made clearer to the voting public??

Usually, the richer you are, the less tax you pay (per dollar "earned"), because you either work out how to hide it, or you work out how to get deductions.

The rich spend more, so by increasing a consumption tax, you are taxing the rich as much as you are taxing the poor.

By increasing the income tax, all you are doing is making the poor and middle income workers pay more, because the rich know how to hide their income.

As far as making things clearer to the voting public, "that can wait until after the election" (K Yingluck).

I fail to see how the poor and middle income workers would be worse off with an increase in income tax if, as stated earlier in this thread, ppl earning under 20k a month do not pay tax unless there is some unannounced plan to lower the starting amount for tax.

As for the consumption tax, this is a regressive tax which impacts more on poorer people because it takes a greater proportion of their income.

I am not sure why you are quoting K Yingluck on this as this is a statement from Korn who is in a different party and, a person with major influence on the Democrats tax policies. I think the thai people would like to hear more about this intended policy of reducing taxes on the rich and increasing them for the poor.

Consumption tax hits richer people too, because they can't avoid paying it, whereas they can usually avoid declaring income. They also spend a greater amount (not proportion) of their income compared to lower income earners. Lower income earners may also be better off because the government has more tax income to spend on social security issues.

But, there are pros and cons for all tax measures, so there is no real point on us thrashing it out here.

I am also sure that the Thai people would like to hear more about all the policies, but some political parties seem to think it's ok to wait until after the election for that.

I can't quite see your argument that there is no point discussing the Dems planned tax policy here when they were included in the OP. Surely the tax policies of all parties should be an important part of any pre election discusion and, since Korn has aired some of his here, this is the ideal place to talk about it.

If these lower income earners are going to be better off by these changes then fair enough but that remains to be seen, however, economics 101 is that regressive taxes are normally poor for redistribution of wealth and hit lower income people harder.

[whybother]

I can't quite see your argument that there is no point discussing the Dems planned tax policy here when they were included in the OP. Surely the tax policies of all parties should be an important part of any pre election discusion and, since Korn has aired some of his here, this is the ideal place to talk about it.

If these lower income earners are going to be better off by these changes then fair enough but that remains to be seen, however, economics 101 is that regressive taxes are normally poor for redistribution of wealth and hit lower income people harder.

I could find you a dozen educated opinions as to why a consumption tax is better than income tax ... and also a dozen opinions as to why it isn't ... all by people far better educated in economics than me.

[Orac]

I can't quite see your argument that there is no point discussing the Dems planned tax policy here when they were included in the OP. Surely the tax policies of all parties should be an important part of any pre election discusion and, since Korn has aired some of his here, this is the ideal place to talk about it.

If these lower income earners are going to be better off by these changes then fair enough but that remains to be seen, however, economics 101 is that regressive taxes are normally poor for redistribution of wealth and hit lower income people harder.

I could find you a dozen educated opinions as to why a consumption tax is better than income tax ... and also a dozen opinions as to why it isn't ... all by people far better educated in economics than me.

Maybe so, you can find educated opinions to argue bother sides of most points. This doesn't get away from the point that Korn has implied that he intends to raise sales taxes if reelected, something that will clearly effect lower income people.

[whybother]

Maybe so, you can find educated opinions to argue bother sides of most points. This doesn't get away from the point that Korn has implied that he intends to raise sales taxes if reelected, something that will clearly effect lower income people.

And will also raise more tax from middle and high income earners to pay for services for lower income people.

[TAWP]

If you applaud a wage-hike with 20% of the lowest and then say it will not affect the office-workers etc, then think again. Wages going up by restaurant etc people has to be covered in prices going up 20%. The ripple-effect would be that prices most likely goes up more than the 20% that started it...and voila, the low-income most likely are same or worse off, the middle-class is suddenly affected highly - but without any wage-increase to offset it - and foreign investors of both factories and offices in their stalls will look elsewhere. Leading to a decline in the middle class and lower class homes overall income as the amount of unemployed workers will increase.

[Beetlejuice]

So now the foreign business owners are concerned about having to pay a fair day`s wage for a fair day’s work, instead of being able to rake in the profits from the sweat and toil of their slave labourers.

It makes no difference anyway, because the fat cat businessman smoking the big cigar sitting behind his desk counting all his money, will not be prepared to see a decrease in profits, so the extra expenditure will as usual be passed on to us, the consumers.

In the end, we pay the price, no matter what happens.

[Nisa]

I can't quite see your argument that there is no point discussing the Dems planned tax policy here when they were included in the OP. Surely the tax policies of all parties should be an important part of any pre election discusion and, since Korn has aired some of his here, this is the ideal place to talk about it.

If these lower income earners are going to be better off by these changes then fair enough but that remains to be seen, however, economics 101 is that regressive taxes are normally poor for redistribution of wealth and hit lower income people harder.

I could find you a dozen educated opinions as to why a consumption tax is better than income tax ... and also a dozen opinions as to why it isn't ... all by people far better educated in economics than me.

Maybe so, you can find educated opinions to argue bother sides of most points. This doesn't get away from the point that Korn has implied that he intends to raise sales taxes if reelected, something that will clearly effect lower income people.

From the OP ..

Korn said if the Democrat Party wins it would introduce reforms in the tax system, like increasing property tax, which would allow cuts in other taxes. Korn also implied that value-added tax might also be increased because the current 7 per cent was very low

It is my understanding that VAT doesn't apply to such things as education, healthcare, general transportation, many farming products, apartment rent. Nor does it apply to small businesses such as the food vendors selling food.

The current VAT is about 7% and any raise would likely be an additional 1/4 or 1/2 %.

So, I don't think it would have as much of a burden on the poor as one might assume but would have the rich paying more since they buy considerably more goods and services where VAT is applied.

[TAWP]

So now the foreign business owners are concerned about having to pay a fair day`s wage for a fair day’s work, instead of being able to rake in the profits from the sweat and toil of their slave labourers.

It makes no difference anyway, because the fat cat businessman smoking the big cigar sitting behind his desk counting all his money, will not be prepared to see a decrease in profits, so the extra expenditure will as usual be passed on to us, the consumers.

In the end, we pay the price, no matter what happens.

Have you ever started your own company or where you one of those lazy/scared people that thought it was your right to have a high payed job, no-matter what your contribution was actually worth to others?