If the govt is going to increase the VAT by 30%, give the poor a break and at least remove the VAT from unprepared food items.

Agricultural produce is VAT exempt

I dont think that is correct. Some ag products are but not all. From my interpretation from, witch could be wrong, There is no produce exempted, only select unprocessed products.

Damn if I can find a Makro bill, and have had this discussion with my wife before, how nothing we buy there is exempted from VAT.

http://www.rd.go.th/publish/6043.0.html

Certain activities are exempted from VAT. Those activities are :

1. Small entrepreneur whose annual turnover is less than 1.8 million baht;
2. Sales and import of unprocessed agricultural products and related goods such as fertilizers, animal feeds, pesticides, etc.;
3. Sales and import of newspapers, magazines, and textbooks;
4. Certain basic services such as:
   • transportation : domestic and international transportation by way of land;
   • healthcare services provided by government and private hospitals as well as clinics;v
   • educational services provided by government and private schools and other recognized educational institutions;
5. professional services : Medical and auditing services, lawyer services in court and other similar professional services that have laws regulating such professions;
6. income from business, commerce, agriculture, industry, transport or any other activity not specified earlier.
7. Cultural services such as amateur sports, services of libraries, museums, zoos;
8. Services in the nature of employment of labour, research and technical services and services of public entertainers;
9. Goods exempted from import duties under the Industrial Estate law imported into an Export Processing Zones (EPZs) and under Chapter 4 of the Customs Tariff Act;
10. Imported goods that are kept under the supervision of the Customs Department which will be re-exported and be entitled to a refund for import duties; and
11. Other services such as religious and charitable services, services of government agencies and local authorities.

Edited July 19, 201411 yr by dcutman

I cant for the life of me see how this will boost the economy , the reverse in fact and additional sales tax will also make Thailand just a little less atractive for tourists. I know they can claim back VAT on certain retail purchases but hotels/Restaurants/ tours will each reflect the increase.

Most important of all is that Sales Taxes always impact those on lowest wages most strongly , far better to raise revenue by ensuring Income tax avoiders cough up.

If the govt is going to increase the VAT by 30%, give the poor a break and at least remove the VAT from unprepared food items.

Agricultural produce is VAT exempt

I dont think that is correct. Some ag products are but not all. From my interpretation from, witch could be wrong, There is no produce exempted, only select unprocessed products.

Damn if I can find a Makro bill, and have had this discussion with my wife before, how nothing we buy there is exempted from VAT.

http://www.rd.go.th/publish/6043.0.html

Certain activities are exempted from VAT. Those activities are :

• Small entrepreneur whose annual turnover is less than 1.8 million baht;
• Sales and import of unprocessed agricultural products and related goods such as fertilizers, animal feeds, pesticides, etc.;
• Sales and import of newspapers, magazines, and textbooks;
• Certain basic services such as:
  • transportation : domestic and international transportation by way of land;
  • healthcare services provided by government and private hospitals as well as clinics;v
  • educational services provided by government and private schools and other recognized educational institutions;
• professional services : Medical and auditing services, lawyer services in court and other similar professional services that have laws regulating such professions;
• income from business, commerce, agriculture, industry, transport or any other activity not specified earlier.
• Cultural services such as amateur sports, services of libraries, museums, zoos;
• Services in the nature of employment of labour, research and technical services and services of public entertainers;
• Goods exempted from import duties under the Industrial Estate law imported into an Export Processing Zones (EPZs) and under Chapter 4 of the Customs Tariff Act;
• Imported goods that are kept under the supervision of the Customs Department which will be re-exported and be entitled to a refund for import duties; and
• Other services such as religious and charitable services, services of government agencies and local authorities.

If u buy it in the market there is no VaT

"The reason is that it wants to boost domestic consumption and economic growth."

Can't see it! Other factors may, but increasing tax isn't one of them.

The answer to your confusion is right above the line you quoted:

"These comments came after the National Council for Peace and Order (NCPO) announced that it would maintain VAT at 7 per cent for a year from October 1, 2014, to September 30, 2015, after which it would be increased to 10 per cent."

They are delaying the VAT increase in the hopes of not throttling back the feeble economic growth. You're welcome.

VAT is added to a product's price at every stage until it lands in the hands of the consumer

Could someone who is more knowledgable about this than I am elucidate this statement for me? It seems that the same goods are being taxed over and over again at a static rate which doesn't make any sense. Does that mean the ingredients used to make a product are taxed at the wholesale level when sold to a manufacturer. Then, they are taxed again when a final product is sold to a retailer. Then, tax is paid again when the consumer buys the final product? As labor becomes increasingly specialized, small firms begin to produce smaller components and parts with greater efficiency than one large company. With this VAT system, it removes the incentive for specialization of labor. Therefore, it seems arguable that it goes against market principles in terms of efficiency. Furthermore, manufacturers and big business will certainly not absorb any of these costs. They are all built into the price and passed on to the consumer. So, consumers are paying all of the business tax. It makes sense from the perspective that the tax is only paid for products that are purchased and therefore in demand by the economy. However, it does go against specialization of labor.

Do I have this all wrong?

It's all in the name, Value Added. VAT registered businesses pay VAT on the price increase of the merchandise they're selling only. This applies whether they are re-selling a product or manufacturing it.

Some of the agriculture and small businesses may be VAT exempt, but if the goods are sold to a VAT registered company, the taxes end up paid in full at the end.

Consider an example of a company buying a product for 50 baht wholesale and selling at 110 retail, 10% VAT included. In every case the company collects 100 baht of the price and the tax is 10 baht.

In Case 1 the company buys in the product at 50 baht, VAT not paid. Cost 50, tax 10, profit margin 50 baht.

Case 2, the price is the same, 50 baht wholesale, but with VAT already paid (4.55 baht) and included in the price. The re-seller pays tax on the value added only. So in this case the cost is 50, tax 5.45 (10% of profit margin), and profit margin 54.55 baht.Confusing, eh? The consumer the price is still 110 baht, and the government still gets their 10 baht.

It is true that currently [and traditionally] a lot of the fresh produce is sold directly to the customer at markets across Thailand without paying VAT. Can you see why the government isn't exactly rushing in to protect the traditional way of doing business and to stem the tide of Tescos and Big Cs? It's all about tax revenue. Those big players can't skip taxes.

Taxes are there to be levied by some and spent by others!

National debt doubled in the last 10 years alone. And wasn't the losses arising from the crazy rice pledging scheme said to amount to 500 billion Baht?!? That's the next generations' burden.

In addition, that high speed train project, would it be commercially viable? Not when the ticket price would be near 2,000 Baht vs luxury buses like CHAN TOUR's superb S-Class @ <800 Baht. Price elasticity of demand and all that - who would be using the train? How many % of the population would be using it? And can't some economist calculate the long term benefits of such an infrastructure project?

Okay, it may give some boost for the few years the rail track is being built. Then what? Cost for its upkeep and debt service & repayment on what, 1 trillion Baht? Gotta pay the piper - or follow Argentina's lead?

The introduction or rise of VAT, or any tax for that matter, can never, by itself, lead to a sustained increase in the rate of change in the price level. Such a change in the inflation rate can be produced by an expansionary monetary policy under circumstances. If, however, the term is interpreted as an increase in the price level (or a one-period increase in the inflation rate), then whether VAT is inflationary in this sense would depend on a number of factors but it is not in itself inflationary and nor is any taxation.

It is seen that the net price effect of VAT would be nil if the VAT is an equal-yield tax. There would not be any effect on the overall price change although there may be changes in relative prices. Tax being revenue neutral, the aggregate demand is unchanged and so there would be no impact on the aggregate price level.

Economists all over the world have viewed that VAT is not inflationary.

Of course an increase in the VAT wouldn't be inflationary.

Everything would just cost you more, that's all.

Edited July 19, 201411 yr by NeverSure

Taxes are there to be levied by some and spent by others!

National debt doubled in the last 10 years alone. And wasn't the losses arising from the crazy rice pledging scheme said to amount to 500 billion Baht?!? That's the next generations' burden.

In addition, that high speed train project, would it be commercially viable? Not when the ticket price would be near 2,000 Baht vs luxury buses like CHAN TOUR's superb S-Class @ <800 Baht. Price elasticity of demand and all that - who would be using the train? How many % of the population would be using it? And can't some economist calculate the long term benefits of such an infrastructure project?

Okay, it may give some boost for the few years the rail track is being built. Then what? Cost for its upkeep and debt service & repayment on what, 1 trillion Baht? Gotta pay the piper - or follow Argentina's lead?

Bla bla bla.

And how much did the size of the economy grow?

"The reason is that it wants to boost domestic consumption and economic growth."

Can't see it! Other factors may, but increasing tax isn't one of them.

The answer to your confusion is right above the line you quoted:

"These comments came after the National Council for Peace and Order (NCPO) announced that it would maintain VAT at 7 per cent for a year from October 1, 2014, to September 30, 2015, after which it would be increased to 10 per cent."

They are delaying the VAT increase in the hopes of not throttling back the feeble economic growth. You're welcome.

Yes, I read that. The VAT rate has been at 7% for many years. Keeping it at 7% indefinitely would be good. There are other taxes that impact those who live here. Import duty (tax) is levied on many products and when the calculation is done you pay 7% tax on the imported product, the freight cost and the import duty.

That hardly seems fair. Import duty is a tax so your paying tax on a tax!

If u buy it in the market there is no VaT

But wouldn't the market-trader have paid a price-including-VAT, when they bought their supplies, from Makro or a distributor ?

And necessarily pass it on to their customers, who are purchasing from them, in the local market ?

IMO there is VAT, it's just not split-out, in the price you see.

That is the least of their worries, when it comes to inflation. The government refuses to admit it, but prices are rising rapidly here. I suspect there may come a time when many tourists and expats decide Thailand does not offer a good enough value anymore, and will begin seeking greener pastures. Will expats live here, and will tourists visit here at the current levels if it gets a lot more expensive? Seems like there are alternatives out there, especially for the tourist market. Of course, the lack of vision probably prevents any of the officials from seeing this clearly, much less devising policy to prevent this from happening. That is called being proactive. Imagine that?

Spidermike

Sent from my iPad using Thaivisa Connect

What do they suppose is happening now? Do they think inflation is under control? Some items might well be under control - or, rather, controlled - but increases in the prices of others more than make up for that.

Inflation is a worry now, never mind when the VAT increase happens,

anyone with money in the bank is in negative territory,as the rates of

interest earned are below inflation [thats the real rate ,not what the Govt

says it is].

regards Worgeordie

And exactly where do you get your inflation information from? The IMF is satisfied with Thailand's inflation figures. Why aren't you?

"The reason is that it wants to boost domestic consumption and economic growth."

Can't see it! Other factors may, but increasing tax isn't one of them.

Sure it increases consumption on the short term as everyone wants to avoid the higher tax and buys thing before the tax increase. On the medium and long term any tax increase slows down econonmy. The more tax a government collects the more power it gets. I always doubt that a government can handle money better than individuals thus no tax incease is good at all.

The logical conclusion of this argument is that there should never be any taxes at all. Actually, in the USA when tax rates were a lot higher in the 50's and 60's, economic growth was a lot faster. And the Laffer curve, which argued that cuts in taxes pay for themselves with increased growth is still waiting for an instance of its vindication in the USA.

Yakult has gone from 5bts to 7bts, only 2 bts granted but %wise its a biggy and all I hear when I go to buy is "price up" and that makes it alright, inflation has been rising all year and not by the usual government low levels. The root of a lot it was the ever popular 300bts a day rate, which everyone thought they were going to get only to wake up and find it applied to a select bunch of people who happened to have a reasonable job in the first place........." and if anyone asks you get 300bts a day........or you aint got a job ext week.......understand!"

A Vat tax will catch all and sundry and that way it is fair, the rich can handle it better than the poor though so it will impact more on the less well off in society.

A rise to 10% is a 25% increase no wonder they are worried about inflation and tourists will take note, regulars may look for pastures new, they are killing the golden goose, but all governments are the same you can never get enough revenue in to make the dreams come true, trouble is where they keep money is like a net rather than a safe and some of it just disappears, whats left well, as I have said before its easy to spend other peoples money.

So much for making the Thai people happy.

Cherry-picking examples is no way to prove that there is inflation. There has been worldwide inflation in agricultural produect prices due to droughts and diseases - especially fact dairy and meat products. Are you going to blame previous Thai government or governments for that? And by the way, an increase fronm 7 to 10 percent is more like a 43% increase.

Inflation is a worry now, never mind when the VAT increase happens,

anyone with money in the bank is in negative territory,as the rates of

interest earned are below inflation [thats the real rate ,not what the Govt

says it is].

regards Worgeordie

And exactly where do you get your inflation information from? The IMF is satisfied with Thailand's inflation figures. Why aren't you?

I live here and all prices are going up and up very week , who cares what the IMF say they are not living here! vat up 3% prices up 10% and more and more, you wait and see.

Inflation is a worry now, never mind when the VAT increase happens,

anyone with money in the bank is in negative territory,as the rates of

interest earned are below inflation [thats the real rate ,not what the Govt

says it is].

regards Worgeordie

And exactly where do you get your inflation information from? The IMF is satisfied with Thailand's inflation figures. Why aren't you?

I live here and all prices are going up and up very week , who cares what the IMF say they are not living here! vat up 3% prices up 10% and more and more, you wait and see.

All prices are going up every week? I don't know where "here" is, but wherever it is, it ain't Thailand. Maybe your posting is coming to us from the Weimar Republic?

Inflation is a worry now, never mind when the VAT increase happens,

anyone with money in the bank is in negative territory,as the rates of

interest earned are below inflation [thats the real rate ,not what the Govt

says it is].

regards Worgeordie

And exactly where do you get your inflation information from? The IMF is satisfied with Thailand's inflation figures. Why aren't you?

I live here and all prices are going up and up very week , who cares what the IMF say they are not living here! vat up 3% prices up 10% and more and more, you wait and see.

All prices are going up every week? I don't know where "here" is, but wherever it is, it ain't Thailand. Maybe your posting is coming to us from the Weimar Republic?

I live in Thailand, clearly you do not do the weekly shopping, or go blindfold!