Thai Finance Ministry proposes to raise the VAT rate to 10 percent

[Pib]

Wrong headline - should say propose to return to the original rate before 1997

Thailand official VAT rate is actually 10% not 7%. But VAT rate was reduced to 7% as part of the economic measures taken following the crisis of 1997. The reduced rate of 7% has been since then confirmed every year.

the following are all exempt from VAT

• Educational services including government and private school
• Audit services
• Medical services
• Health care services including government and private hospitals and clinics
• Domestic transportation
• Renting of immovable properties

sale of agricultural produce, animal and animal feeds, fertilizer, chemical products for eradicating weeds, sale of newspaper, inland transport service, rental of immovable property; or under (2) Section 81 (2) such as sale of agricultural produce, animal and animal feeds, fertilizer, chemical products for eradicating weeds, sale of newspaper, etc.

Finally are exempted from the VAT small business where tax base does not exceed 1,800,000 Baht.

So the poor probably only pay VAT on purchases alcohol, cigarettes and purchases at 7-11 ( and if poor probably shouldn't be shopping at 7-11s

Isn't fuel also not taxed with VAT?

It sure is...7%....plus several other fuel related taxes. Below is the current price & tax structure breakout for diesel....how that Bt29.99/liter in the Bangkok area is reached. Increasing the VAT will affect "everybody" through direct and indirect affects of the higher tax.

Edited October 10, 2014 by Pib

[jdinasia]

Wrong headline - should say propose to return to the original rate before 1997

Thailand official VAT rate is actually 10% not 7%. But VAT rate was reduced to 7% as part of the economic measures taken following the crisis of 1997. The reduced rate of 7% has been since then confirmed every year.

the following are all exempt from VAT

• Educational services including government and private school
• Audit services
• Medical services
• Health care services including government and private hospitals and clinics
• Domestic transportation
• Renting of immovable properties

sale of agricultural produce, animal and animal feeds, fertilizer, chemical products for eradicating weeds, sale of newspaper, inland transport service, rental of immovable property; or under (2) Section 81 (2) such as sale of agricultural produce, animal and animal feeds, fertilizer, chemical products for eradicating weeds, sale of newspaper, etc.

Finally are exempted from the VAT small business where tax base does not exceed 1,800,000 Baht.

So the poor probably only pay VAT on purchases alcohol, cigarettes and purchases at 7-11 ( and if poor probably shouldn't be shopping at 7-11s

Isn't fuel also not taxed with VAT?

It sure is...7%....plus several other fuel related taxes. Below is the current price & tax structure breakout for diesel....how that Bt29.99/liter in the Bangkok area is reached.

Capture.JPG

Thank you.

[samran]

A 3% rise in taxes is draconian and will certainly be felt by everyone. It would be a lot easier to swallow 8%, but 10% is simple stupid.

Just because a 3% tax is put on, doesnt mean all prices rise by 3%.

Look up basic laws of supply and demand, and most importantly, the elasticity of supply and demand.

[keestha]

If they collected all the VAT due they may well be able to lower the rate not raise it.

Exactly. Small businesses are exempt from VAT, but there are countless businesses that should pay VAT (they have to if turnover exceeds 1.8 mil. Baht), but do not.

Or they pay less VAT than they should, sometimes giving customers the choice between a VAT receipt for which they pay 7% more, or a normal receipt. A more efficient revenue department, and not raising the VAT tariff, is the better way to increase the VAT revenue.

It is also not clear to me why certain articles like diary products and cat food are VAT exempt.

[zydeco]

"Mr. Rangsan firmly believes that the new VAT rate would not affect low-income earners"

Really?

Would he care to explain how that will be then?

Does he actually know what VAT is?

A sincere wish that something is so will make it so.

[khunpa]

Didn't they recomment only a month ago that there was no need for an increase

Yeah, and also reports of growing economy. No need to face facts, just get some fast VAT money in now to cover some of the holes.

[Halion]

Increasing VAT is simply another way of asking the public to support the administrative incompetence of Government. Before they start trying to balance the books they need to take a firm and active stance on government and related administrative corruption with regard to public funds. This country is most comical but in a slap stick manner.

[jamiesilver]

If they raise taxes 10% then no doubt i will raise my prices 3% - im sorry but thats the way business works, i have my profits and the gov are taking a chunk out of them. so i will adjust my price.

So yes... it will affect everyone poor or not.... Infact just for the hell of it i may raise prices 5%....

Yes just one month ago they actually said they were considering lowering VAT to stimulate more spending...

This is not good news!

[Langsuan Man]

Why is it always the rich telling the poor that increased VAT will not effect them ?

[whgthai]

Yep. Ask merchants and suppliers to make things more affordable for Thais. But those ideas never apply to government.

With already low unemployment in Thailand, reduce the number of staff in big stores like HomePro or ThaiWatsadu or Global and offer better prices. These people do not add any value to anyone's 'shopping experience' as I can walk to a particular isle myself. And mostly not having a clue about products anyway.

[rubl]

Mr. Rangsan firmly believes that the new VAT rate would not affect low-income earners

BS, it affects everybody but the monkhood and anyone else living on handouts. The only way it wouldn't affect low income earners would be if they were exempted from paying the extra on goods and services.

Thailand is already approaching or surpassing the cost of first world countries for many things. Is it trying to masquerade as them in everything but substance?

Since VAT is raised on anything bought which generates a VAT receipt, everyone is effected in principle.

Mind you, there is an underground economy which doesn't work with VAT receipts and the users are mostly the very poor and the very rich. They don't shop for the same items though and the items the very poor shop for are much more essentials for living (or even surviving). So the statement of raising VAT might have more effect on middle (income) class could very well be correct.

[tullynagardy]

So the statement of raising VAT might have more effect on middle (income) class could very well be correct.

Which is ironically the group this elitist Junta needs to keep on side to give it any kind of legitimacy and support.

I`ve read many articles declaring the economy would be what would define this coups stability or not. It seems they are failing miserably and the seeds of discontent are growing.

Watch this space.

[manarak]

Very bad move, VAT should be kept as low as possible!

[rubl]

Since VAT is raised on anything bought which generates a VAT receipt, everyone is effected in principle.

Mind you, there is an underground economy which doesn't work with VAT receipts and the users are mostly the very poor and the very rich. They don't shop for the same items though and the items the very poor shop for are much more essentials for living (or even surviving). So the statement of raising VAT might have more effect on middle (income) class could very well be correct.

Which is ironically the group this elitist Junta needs to keep on side to give it any kind of legitimacy and support.

I`ve read many articles declaring the economy would be what would define this coups stability or not. It seems they are failing miserably and the seeds of discontent are growing.

Watch this space.

The previous government already was talking and had plans to raise VAT. With the financial restrictions the new government is facing due to the spendthrift Yingluck Administrations, there doesn't seem to be much choice. Even "property and inheritance tax' is being introduced. Something the Surayut government tried but dropped on being convinced by some that such important matters needed to be left for 'elected' governments to be handled.

So, an NLA which doesn't need any support to increase its legitimacy, does what needs to be done.

[Brian Corrigan]

This is really going to please all those people who wanted a Government made up of the "Good people" and it can only get worse for them.Yingluck must be sitting at home laughing at this.

[rubl]

This is really going to please all those people who wanted a Government made up of the "Good people" and it can only get worse for them.Yingluck must be sitting at home laughing at this.

True, true.

Ms. Yingluck might think something like "I avoided raising VAT deftly and got to spent the money and this next government is getting blamed for their austerity measures. It's inverse from what my brother did. He blamed the previous government for austerity measures and used the global boom to spend, spend, spend"

[konying]

Excellent idea , because prices are not high enough.

Only hope ministry will hold 1 year compulsory school to educate witty business owners that 3% vat rise does not mean prices need to be raised by whole 10%

[tullynagardy]

The previous government already was talking and had plans to raise VAT.

I find it rather amusing even the coup mongerers like yourself admit that most of the juntas policies just replicate exactly what the previous government did before. Makes you look a complete fool for supporting policies that are the same as the administration you dedicate your entire life (you post 50 times a day about them) deriding. In case you didn`t notice the urban middle class wasn`t a big fan of the previous government and tax was a major concern.

So, an NLA which doesn't need any support to increase its legitimacy, does what needs to be done.

It needs a certain level of support and popularity to suppress the inevitable backlash that will come sooner or later. It`s total failure so far will speed this to happen before the event I previously imagined would trigger it.

As for all this bullsh1t about sorting out the previous governments mess, you are again showing ignorance both to reality and economics,

2013 actuals

Real GDP growth (% change): 2.9% (2013 Actual) (also known as GDP Growth)

Inflation Rate (CPI, % change Dec/Dec): 1.7% (2013 Actual)

Gen. Gov. Financial Balance/GDP: -2% (2013 Actual) (also known as Fiscal Balance)

Current Account Balance/GDP: -0.7% (2013 Actual) (also known as External Balance)

Those are figures that most Western governments dream of, and quite frankly are figures Prayuth would dream of judging by the economic performance so far. There`s only so long you can use the line "emm yeah but Thaksin was a b@stard" and that honeymoon is over. (though you seem intent on using it forever due to some unnatural obsession.)

Thai people are waking up to the fact they now are worse off than before, as poor as the previous administration was. TVF pensioners like yourself, sat posting nonsense online all day in the deluded belief you somehow scored a victory, may not feel it but then, thankfully, your views mean nothing anyway

[rubl]

The previous government already was talking and had plans to raise VAT. With the financial restrictions the new government is facing due to the spendthrift Yingluck Administrations, there doesn't seem to be much choice. Even "property and inheritance tax' is being introduced. Something the Surayut government tried but dropped on being convinced by some that such important matters needed to be left for 'elected' governments to be handled.

So, an NLA which doesn't need any support to increase its legitimacy, does what needs to be done.

I find it rather amusing even the coup mongerers like yourself admit that most of the juntas policies just replicate exactly what the previous government did before. Makes you look a complete fool for supporting policies that are the same as the administration you dedicate your entire life (you post 50 times a day about them) deriding. In case you didn`t notice the urban middle class wasn`t a big fan of the previous government and tax was a major concern.

It needs a certain level of support and popularity to suppress the inevitable backlash that will come sooner or later. It`s total failure so far will speed this to happen before the event I previously imagined would trigger it.

As for all this bullsh1t about sorting out the previous governments mess, you are again showing ignorance both to reality and economics,

2013 actuals

Real GDP growth (% change): 2.9% (2013 Actual) (also known as GDP Growth)

Inflation Rate (CPI, % change Dec/Dec): 1.7% (2013 Actual)

Gen. Gov. Financial Balance/GDP: -2% (2013 Actual) (also known as Fiscal Balance)

Current Account Balance/GDP: -0.7% (2013 Actual) (also known as External Balance)

Those are figures that most Western governments dream of, and quite frankly are figures Prayuth would dream of judging by the economic performance so far. There`s only so long you can use the line "emm yeah but Thaksin was a b@stard" and that honeymoon is over. (though you seem intent on using it forever due to some unnatural obsession.)

Thai people are waking up to the fact they now are worse off than before, as poor as the previous administration was. TVF pensioners like yourself, sat posting nonsense online all day in the deluded belief you somehow scored a victory, may not feel it but then, thankfully, your views mean nothing anyway

Economy healthy, no problems, all rosy. Excuses, I couldn't find anything real recent

2014-09-21

" Much of the blame for the nation's deteriorating fiscal health should be placed on the previous government of Yingluck Shinawatra, who engaged in a spending spree to finance a raft of measures to please voters. These actions included corporate tax cuts, purchases of rice from farmers at high prices and massive tax breaks for consumers buying automobiles and houses. The military government has ruled out any such giveaway of taxpayer money, but it has no choice but to increase public investment to restart the foundering economy."

http://asia.nikkei.com/Politics-Economy/Economy/Thai-military-junta-pushes-tax-hikes

2014-10-09

"There is another important issue -- a parallel deterioration in the government's balance sheet, which has suffered as a result of fiscal stimulus measures intended to keep the economy moving. Thailand's public debt remains relatively low compared with other nations. But from 37.27% of GDP in 2008, it is forecast to hit 47.1% next year, according to the country's Public Debt Management Office."

http://asia.nikkei.com/magazine/20141009-The-house-that-debt-built/Cover-Story/Indebted-Thai-consumers-cant-keep-doing-the-heavy-lifting

BTW what is a TVF pensioner ?

[rubl]

As by the Interim Constitution and sworn in by H.M. the King ?

The PTP government was sworn in by the KIng. Were they legitimate to you?

Does that have any relation with fabs' question on the legitimacy of the NLA ? Furthermore does your question have anything to do with VAT?

[Balance]

....Permanent Secretary for Finance Rangsan Sriworasart stated that the VAT increase would generate at least 150-160 billion baht in revenue for the government.

Mr. Rangsan firmly believes that the new VAT rate would not affect low-income earners but it would have more of an impact on the middle-class.

Maybe, the permanent secrettary didn't read or hear what just happened in Japan after a VAT-rise by 3%, up from 5%. Headline: Japanese economy flounders after sales tax rise.

It's a shame that a PS of the FM doesn't know the negative effects of a VAT-rise. It especially hits the poor by higher prices. Or the companies lower the volume of the products they sell, a hidden price increase.

I don't know if rooms for rent are tax free. Let me assume, someone (poor) earns 10.000 Baht per month and pays 2.000 Baht for the rent. Then 1% is 80 Baht per month, 960 baht per year. Not much for you and me, but for the poor. This loss doesn't include the normal reaction

"Every time the VAT goes up,manufacturers take the opportunity to raise prices" (#10, worgeordie)

So this poor people would lose at least 1.000 baht per year or more.

Mr. Secretary, no affect on low income earners, and are you sure that the sales will not go downwards?

Perhaps a refresher course in arithmetic, especially the concept of percentages would assist with the understanding that regressive taxes, BY DEFINITION, have a greater impact on the poor simply because the tax is a higher percentage of their income.

Suggestion: take the amount of money that the additional 3% would generate and add that amount to the inheritance tax.

[thatswhatuthought]

Wrong headline - should say propose to return to the original rate before 1997

Thailand official VAT rate is actually 10% not 7%. But VAT rate was reduced to 7% as part of the economic measures taken following the crisis of 1997. The reduced rate of 7% has been since then confirmed every year.

the following are all exempt from VAT

• Educational services including government and private school
• Audit services
• Medical services
• Health care services including government and private hospitals and clinics
• Domestic transportation
• Renting of immovable properties

sale of agricultural produce, animal and animal feeds, fertilizer, chemical products for eradicating weeds, sale of newspaper, inland transport service, rental of immovable property; or under (2) Section 81 (2) such as sale of agricultural produce, animal and animal feeds, fertilizer, chemical products for eradicating weeds, sale of newspaper, etc.

Finally are exempted from the VAT small business where tax base does not exceed 1,800,000 Baht.

So the poor probably only pay VAT on purchases alcohol, cigarettes and purchases at 7-11 ( and if poor probably shouldn't be shopping at 7-11s

(If poor probably shouldn't shop at 7 eleven )

Can you recommend another convenient store with lower prices?

[halloween]

Perhaps a refresher course in arithmetic, especially the concept of percentages would assist with the understanding that regressive taxes, BY DEFINITION, have a greater impact on the poor simply because the tax is a higher percentage of their income.

Suggestion: take the amount of money that the additional 3% would generate and add that amount to the inheritance tax.

That would be true if the tax is applied to those items that the poor buy. Poor people spend nearly all the income on essentials which are either tax exempt or bought from non-participating retailers. Higher income earners have more discretionary income that will be spent on luxuries which attract VAT and excise.

[BSJ]

"He assured that the 10% VAT rate would not affect low-income earners " What a load of BS!

You guys haven't presented an argument yet that shows the poor peasants will NOT be affected. Come on, show me how this won't hurt the poor in some way.

[Gulfsailor]

Most here don't even understand the meaning of VAT, and just assume it's like sales tax added at the end. VAT is a tax on Added Value. Hence at every step in the sales pipeline from production to end consumer the tax is calculated on the increase in value. Saying the small Pop and Mom stores don't pay VAT is incorrect. They just don't add it to the final step, but still pay it on their purchase. So in effect the loss of VAT income for government due to VAT unregistered companies is very minimal.

[tbthailand]

Mr. Rangsan firmly believes that the new VAT rate would not affect low-income earners but it would have more of an impact on the middle-class.

VAT is a regressive tax. Always has been and always will be.

The rich like to point to the poor and say 'they don't pay taxes'. Well they do - and disproportionately higher taxes than the rich.

But 'firmly believing' something that is not true is just for propaganda purposes. No poor/working class Thai is going to say that the higher costs at Big C don't affect them.

[manhood]

Uncontrolled government spending and corruption in unimaginable extent must necessarily result in higher taxes: the state Thailand is going the way to get otherwise bankrupt.

Instead of stabalize the middle class they show them the way back to the lower class. God save the some righ families in this coutnry!

No development in and for the future like this for sure!

[monkeycountry]

Mr. Rangsan firmly believes that the new VAT rate would not affect low-income earners

BS, it affects everybody but the monkhood and anyone else living on handouts. The only way it wouldn't affect low income earners would be if they were exempted from paying the extra on goods and services.

Thailand is already approaching or surpassing the cost of first world countries for many things. Is it trying to masquerade as them in everything but substance?

Much of what is bought by the poor has no VAT added. I.e. market stalls etc don't charge vat.

True, but unless the market stall imports stuff directly from China, they buy their stuff wholesale at a bigger store, and that store does charge VAT, so the market stall suddenly has to pay 3% more for their stuff and will therefore raise prices at the stall by 3%.

Same goes for foodstalls, they may not charge VAT, but they buy most of the food in TESCO or similar who adds VAT, which means the food stall owner has to increase prices accordingly.

[Asiantravel]

....Permanent Secretary for Finance Rangsan Sriworasart stated that the VAT increase would generate at least 150-160 billion baht in revenue for the government.

Mr. Rangsan firmly believes that the new VAT rate would not affect low-income earners but it would have more of an impact on the middle-class.

Maybe, the permanent secrettary didn't read or hear what just happened in Japan after a VAT-rise by 3%, up from 5%. Headline: Japanese economy flounders after sales tax rise.

It's a shame that a PS of the FM doesn't know the negative effects of a VAT-rise. It especially hits the poor by higher prices. Or the companies lower the volume of the products they sell, a hidden price increase.

I don't know if rooms for rent are tax free. Let me assume, someone (poor) earns 10.000 Baht per month and pays 2.000 Baht for the rent. Then 1% is 80 Baht per month, 960 baht per year. Not much for you and me, but for the poor. This loss doesn't include the normal reaction

"Every time the VAT goes up,manufacturers take the opportunity to raise prices" (#10, worgeordie)

So this poor people would lose at least 1.000 baht per year or more.

Mr. Secretary, no affect on low income earners, and are you sure that the sales will not go downwards?

" Headline: Japanese economy flounders after sales tax rise. "

Yes indeed ..........in fact that increase of 3% in Japan’s VAT resulted in the Japanese economy slumping by 6.8%.

http://www.telegraph.co.uk/finance/economics/11030133/How-Japans-massive-VAT-increase-has-crippled-the-economy.html

[metisdead]

A baiting post has been removed as well as the replies.