Thailand: Steeper Tax Cut Needed To Stop 'brain Drain'

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SPECIAL REPORT

Steeper tax cut needed to stop 'brain drain'

Achara Deboonme

The Nation

Move will attract more talent to the country and draw new investment, say experts

BANGKOK: -- he Pheu Thai government is trying to keep taxpayers happy by restructuring the personal income tax rates, but a steeper cut is necessary if the Kingdom wants to raise its profile among foreign investors, who are being wooed by countries with lower tax rates.

Also a steeper cut will be fair to all those who pay income tax, experts said.

Effective next year, the personal income tax rate for the highest bracket will be cut from 37 per cent to 35 per cent, the first major change in 20 years. True, the tax in Thailand for this bracket is lower compared to the 41 to 50 per cent in China and Japan, and 40 per cent in Taiwan. However, compared to Singapore and Malaysia - the two Asean members who offer comparative levels of infrastructure and skilled labour as Thailand - this rate is still high. Singapore's highest tax rate is 20 per cent, while Malaysia is 26 per cent. Regionally, Thailand's top personal income tax rate is the highest, even when compared to Vietnam, which charges 35 per cent and Indonesia, which has fixed its rate at 30 per cent.

Thavorn Rujivanarom, lead tax partner of PwC Thailand, said cutting taxes would be one of the first steps Thailand would have to take in order to avoid brain drain and attract newcomers.

"With the corporate tax cut, we can draw new investment and create new jobs. With lower personal income tax rates, we can draw professionals like doctors. This will benefit the country as a whole as this would make Thailand more attractive for international workers," he said.

Under the new tax structure in Thailand, those with a net taxable income of above Bt4 million are subjected to the highest rate of 35 per cent. In comparison, expats working in Singapore pay 15 per cent if they have taxable income of no more than S$160,000 or Bt4.06 million. The highest rate of 20 per cent is slapped on those with taxable income of more than Bt8.1 million. In Malaysia, only those with taxable income of more than 100,000 ringgit or Bt10 million are subjected to the highest rate of 26 per cent.

"Tax savings aside, it is essential for the government to focus on the overall picture - making Thailand

an attractive job market particular-ly when the Asean Economic Community comes into effect," Thavorn said.

Benjamas Kullakattimas, tax partner at KPMG Thailand, said tax cuts would benefit foreign companies' highly skilled employees who normally have to pay the highest tax. Indeed, there are alternatives for expats to save on taxes in Thailand, such as working for Regional Operating Headquarters which would see their personal income tax rate being brought down to 15 per cent.

When asked what the government could do to make Thailand more attractive as well as make the tax structure fair to all parties, she suggested further cuts in personal income tax.

"When the corporate income tax is reduced, the personal income tax should also be reduced. Prior to 2012, the effective corporate income tax rate was 37 per cent and the highest personal income tax rate was also 37 per cent. Since the corporate income tax rate will be reduced to 20 per cent in 2013, the personal income tax should also be cut to stay aligned with the corporate tax rate; for instance, 28 per cent. This would be fair to all parties. The tax-rate gap between corporates and individuals could possibly move individuals to run their business in the form of a corporation so as to pay an effective tax rate of 28 per cent," she said.

However, without more cuts or an increase in value-added tax, she anticipates that in light of a lower corporate tax rate, the Revenue Department will next year start flexing its muscles more to achieve the revenue target. More close scrutiny of tax audits can be anticipated.

-- The Nation 2012-12-24

[rheinwiese]

brain drain??

[zydeco]

brain drain??

They probably meant "brain dead".

[Gulfsailor]

" However, compared to Singapore and Malaysia - the two Asean members who offer comparative levels of infrastructure and skilled labour as Thailand"

5555555 hilarious to compare Thailand with Singapore in regards to skilled labour. I have to resort to India, Pakistan and Eastern European countries, to find people who can do the skilled jobs that I am offering. No Thai to be found.

[vijer]

BANGKOK: -- he Pheu Thai government is trying to keep taxpayers happy by restructuring the personal income tax rates, but a steeper cut is necessary if the Kingdom wants to raise its profile among foreign investors, who are being wooed by countries with lower tax rates.

What nonsense, and how is this tied into "Brain Drain"? Oh I forgot, Thailand is the hub of intelligence, and all of those intelligent people are running to other countries (countries which all have high unemployment and speak English, those countries must be desperate for people that barely speak English.). These "brains" barely speak English and they have very little creativity and they were passed through an education system that doesn't fail any student. This is just a bullshit excuse to give the wealthy more money. Same thing is happening in the USA.

Let's see, the government reduced corporate taxes, then raised the price of electricity and fuel subsidies. Hmm, who is effected the most by thoses taxes, the poor get screwed as they spend every penny they make and the rich just stick more money in their pockets.

[caykay]

What brain drain are they talking about? Thailand's one and only draw for companies is cheap unskilled labor. There are no brains to speak of!

[Skywalker69]

What brain drain are they talking about? Thailand's one and only draw for companies is cheap unskilled labor. There are no brains to speak of!

Yingluck having plans to move to Dubai?

[Thai at Heart]

Said it 1000 times, almost no one declares an income of 4 mn. They get paid in kind or transfer price the profits out of the country, or simply get paid offshore.

[Halion]

However, compared to Singapore and Malaysia - the two Asean members who offer comparative levels of infrastructure and skilled labour as Thailand - t

Who is this clown. To compare Thailand with Singapore with regard to infrastructure and skilled labour is simply ridiculous and a bridge too far.

It only goes to prove the ignorance of the media to write such utter rubbish. This reporter should change his vocation to that of collecting garbage rather than writing it.

[MaxLee]

Brain dead, that's what the Phu Yai elite intends to do to the less educated people and millions of children and students: brain dead through rote learning exams

[yourauntbob]

This article is soo poorly written that it has has an effect opposite of its intent. Thailand cannot be compared to Malaysia let alone Singapore; 100,000 ringit is 1 million baht, not 10 million; and smart Thai's dont leave Thailand because of the tax rate, but because of the employment opportunities in other countries. I think "The Nation" is suffering from brain drain.

That being said, I do believe taxes do affect peoples behavior.

[bkk_mike]

I don't know what sort of Thais you meet, but I know quite a lot of educated Thais. (and by that, I mean degrees from good Universities in the UK or US).

I think the real issue though here isn't tax rates as such, but that salary levels aren't competitive.

i.e. The Asean Economic Community will allow for the free movement of professional staff, in a similar way to the EU allowing free movement of labour. The result is that people from countries that don't have high salaries (like Poland in the EU) or at the upper end of the pay scale, high taxes (like France) can result in lots of people leaving and looking for work in the countries that pay better / have lower taxes.

Asean won't initially suffer at the bottom end because they're only opening up a free market in labour for professionals, but language issues probably mean that the only staff likely to come to Thailand initially are those who are moving to work within multinationals where the business language is English. (i.e. I worked for a US firm in Japan and the Japanese staff all had to speak English as it wasn't expected that the foreign staff would speak Japanese. I think it was easily the most multicultural group I ever worked in - 11 people - 10 nationalities - including one Thai).

Doctors are almost certainly going to be predominantly going the other way. i.e. Thai doctors that speak fluent English will be able to work in Singapore for more money than they get here. But the language barrier for dealing with patients (that even in the hospitals geared up for medical tourism, Thais are a significant chunk of patients), means I don't foresee lots of doctors coming here. (Any that already speak Thai are unlikely to have had visa issues preventing them working here. That would just leave large hospitals where the staff would be large enough in each specialism that a Thai doctor would deal with monoglot Thais)

I think the government is just realising that, in some professions, they will suffer a brain drain in 2015, as if you can go and work in Singapore for more money and less tax (and enough more money to keep the same lifestyle), with no issues getting visas to slow things down for the company doing the hiring..., what is going to keep educated people in Thailand?

Edited December 24, 2012 by bkk_mike

[chrisrazz]

This article is soo poorly written that it has has an effect opposite of its intent. Thailand cannot be compared to Malaysia let alone Singapore; 100,000 ringit is 1 million baht, not 10 million; and smart Thai's dont leave Thailand because of the tax rate, but because of the employment opportunities in other countries. I think "The Nation" is suffering from brain drain.

That being said, I do believe taxes do affect peoples behavior.

That's the nation for you

[khunken]

Hard to know what the Nation thinks. There's another thread with a Nation editorial on the go here:

http://www.thaivisa.com/forum/topic/607082-why-are-we-cutting-tax-for-the-most-wealthy-people-thai-editorial/

[Arkady]

Brain drain assumes there is likely to be demand for Thai brains elsewhere. My guess is that AEC won't change anything. There have always been elite Thais educated overseas who are in demand to work in London , New York or wherever but the AEC is not going to make the rest of them any more competitive or desirable. I'd say there is no need to worry about a brain drain until they make serious efforts to develop a credible public education system.

[Briggsy]

This is the first I have heard of a Thai brain drain.

Very few Thais work overseas in highly skilled or highly trained positions when compared with comparable nations like the Philippines, India, African nations, etc. Reasons include highly skilled professionals are able to find very well-paid packages in both the private and public sector within Thailand, lack of competence in English and a resistance to work and live outside of a Thai environment.

If Thailand lacks expertise in certain sectors, like engineering design, it is because of the standards in the universities and lackadaisical working culture. It is not due to a brain drain.

Edited December 24, 2012 by Briggsy

[hellodolly]

According to the head lines Thailand is having a brain drain.

Does any one know where they are getting the brains to drain.

Sounded more like they are trying to stop existing bossiness from leaving the country.

[vijer]

I don't know what sort of Thais you meet, but I know quite a lot of educated Thais. (and by that, I mean degrees from good Universities in the UK or US).

I think the real issue though here isn't tax rates as such, but that salary levels aren't competitive.

i.e. The Asean Economic Community will allow for the free movement of professional staff, in a similar way to the EU allowing free movement of labour. The result is that people from countries that don't have high salaries (like Poland in the EU) or at the upper end of the pay scale, high taxes (like France) can result in lots of people leaving and looking for work in the countries that pay better / have lower taxes.

Asean won't initially suffer at the bottom end because they're only opening up a free market in labour for professionals, but language issues probably mean that the only staff likely to come to Thailand initially are those who are moving to work within multinationals where the business language is English. (i.e. I worked for a US firm in Japan and the Japanese staff all had to speak English as it wasn't expected that the foreign staff would speak Japanese. I think it was easily the most multicultural group I ever worked in - 11 people - 10 nationalities - including one Thai).

Doctors are almost certainly going to be predominantly going the other way. i.e. Thai doctors that speak fluent English will be able to work in Singapore for more money than they get here. But the language barrier for dealing with patients (that even in the hospitals geared up for medical tourism, Thais are a significant chunk of patients), means I don't foresee lots of doctors coming here. (Any that already speak Thai are unlikely to have had visa issues preventing them working here. That would just leave large hospitals where the staff would be large enough in each specialism that a Thai doctor would deal with monoglot Thais)

I think the government is just realising that, in some professions, they will suffer a brain drain in 2015, as if you can go and work in Singapore for more money and less tax (and enough more money to keep the same lifestyle), with no issues getting visas to slow things down for the company doing the hiring..., what is going to keep educated people in Thailand?

Almost all of the adult students I teach have masters degrees, still doesn't make them smart or desirable. Very nice people though.

[Tanaka]

" However, compared to Singapore and Malaysia - the two Asean members who offer comparative levels of infrastructure and skilled labour as Thailand"

5555555 hilarious to compare Thailand with Singapore in regards to skilled labour. I have to resort to India, Pakistan and Eastern European countries, to find people who can do the skilled jobs that I am offering. No Thai to be found.

It is not only that Thais are not skilled. Most of them are also too lazy to be bothered with a full time job that requires responsibility.

[rotary]

Lower taxes.......are you listening Barack?

[TallGuyJohninBKK]

Thavorn Rujivanarom, lead tax partner of PwC Thailand, said cutting taxes would be one of the first steps Thailand would have to take in order to avoid brain drain and attract newcomers.

"With the corporate tax cut, we can draw new investment and create new jobs. With lower personal income tax rates, we can draw professionals like doctors. This will benefit the country as a whole as this would make Thailand more attractive for international workers," he said.

I'm not sure what this guy is talking about in regards to attracting more doctors in Thailand...

If he means attracting more doctors from other countries such as ASEAN members, that seems pretty unlikely. As best as I understand it, you have to be pretty fluent in Thai in order to gain a license to practice medicine in Thailand, and not many from any other countries will be in that position. Hence the rarity of non-Thai doctors here already.

If he means attracting more Thais to pursue careers as doctors, I seriously doubt young people graduating from universities are going to be thinking, Oooo... I was going aspire to be a spare parts inventory manager. But now I'm going to aspire to be a MD because the Thai government might lower the personal income tax rate.

But on the issue of "brain drain," medicine is actually one field where there very well might be an exodus of English speaking Thai doctors to other ASEAN countries, at least to the extent that there might be more lucrative job opportunities in some other countries sorely in need of English speaking, foreign trained MDs, where Thailand probably ranks higher than most of its ASEAN country peers.

Edited December 24, 2012 by TallGuyJohninBKK

[kinmaew]

Thailand cannot compare to Singapore because SG welcomes foreigners to live and work with no hassles, Thailand does not, and until they do the smart money and labour will stay in countries like SG. Not sure about MY though, but I like the fact they give you 3 months visa at the airport.