The many dilemmas in levying the Thai inheritance tax

[webfact]

BURNING ISSUE
The many dilemmas in levying the inheritance tax
Sasithorn Ongdee

BANGKOK: -- Details on the inheritance tax are getting clearer and are being widely acknowledged by the public. Those who inherit assets exceeding Bt50 million after the death of the asset owner will be subject to a 10-per-cent tax.

If the inheritance is before the death of the asset owner, the inheritors will be subject to a 5-per-cent tax on assets valued above Bt10 million.

The assets, which must be registered, include houses, land, cars, bonds, deposits and securities.

Recipients of such assets who are not heirs will be subject to a tax rate based on their personal income-tax base.

Finance Minister Sommai Phasee is committed to pushing the Inheritance Tax Bill at the Cabinet meeting next Tuesday for consideration, after failing to do so this week because of the absence of Prime Minister General Prayut Chan-o-cha.

Though most Thais agree on the inheritance tax, they are still divided on the rate proposed by the Finance Ministry.

One side believes the tax rate is too high and will discourage people saving for the future or for their heirs. Also, the tax would be redundant and might have negative impacts on small and medium-sized enterprises in the future.

As revealed in a paper released by Thailand Future Foundation last weekend, inheritance forms a part of the capital of SME businesses. If a high tax is imposed on that, the SMEs will be among the taxpayers most affected, because the inheritance tax would add to the burden of other outflows like corporate income tax (20 per cent), dividend tax (10 per cent) and tax on interest (15 per cent).

Taking an example, the report states that out of SMEs' earnings of Bt100, they will have only Bt74 left after taxes, including inheritance tax at the 10-per-cent rate. This is lower than the Bt85 in Singapore, where there is no inheritance tax, corporate taxes are lower than in Thailand and dividends are tax-free.

On the other hand, some said the maximum rate of 10 per cent on inheritance was low compared with some countries like Switzerland (55 per cent), Japan (50 per cent) and France (45 per cent).

But there will be a good side effect from the inheritance tax, as they believe that some money will be moved into foundations and the insurance business because of tax shields for the rich. Hence there will be income redistribution.

Some argue that the maximum tax rate should be lower than 10 per cent and the minimum asset value to be taxed should be more than B50 million.

However, both sides are of the view that collection of inheritance tax will not amount to much, probably a few billion baht. However, this would be better than nothing.

Some suggested that the tax should be earmarked for a specific purpose such as education. Otherwise, most of the tax collected will eventually return to the hands of the rich.

To what extent the Prayut government will dare to push the inheritance tax bill, which has never been done by previous governments, will have to be seen. What if the voice of the elite gets louder?

Also to be seen is whether the ceiling of a 10-per-cent tax rate should be lowered or the floor amount to be subject to tax - Bt50-million assets - should be raised.

Source: http://www.nationmultimedia.com/national/The-many-dilemmas-in-levying-the-inheritance-tax-30247755.html


-- The Nation 2014-11-14

[The stuttering parrot]

Taxing the dead!

I am sure this is going to make Thais even happier!

Monies earmarked for such things as education .

Yeah right!

[SABloke]

''Though most Thais agree on the inheritance tax, they are still divided on the rate proposed by the Finance Ministry''

Considering many Thais don't even understand what regular income tax is, I find this statement hard to believe.

[chainarong]

There is no dilemma just don't have any , a death tax, the most repugnant tax you could think of, it only applies to the rich , so it is a wonder it even was thought of, out of step with time, as in many other issues in Thailand, more needs to be done to streamline trade, manufacturing , mining and immigration rules, that will increase your tax base.

[NongKhaiKid]

There is no dilemma just don't have any , a death tax, the most repugnant tax you could think of, it only applies to the rich , so it is a wonder it even was thought of, out of step with time, as in many other issues in Thailand, more needs to be done to streamline trade, manufacturing , mining and immigration rules, that will increase your tax base.

It is hard to imagine how this was proposed as those who make the major decisions, or at least can influence them, are the very ones who will be affected.

Better to have no lame legislation at all rather than a law conveniently full of loopholes.

[Robert24]

I think the article doesn't show much insight into this topic:

1) taxing inheritance on wealth in Thailand will be limited to land ownership and Thai company ownership. Other wealth like assets on savings accounts, stocks, bonds, precious metal, assets outside of Thailand are likely not impacted since the Thai government has no knowledge about it. The idea that people will register those assets upon death is wishful thinking.

2) The reference to Swiss inheritance tax is wrong. Direct descendants do not have to pay inheritance tax in Switzerland and some cantons (i.e. provinces) have completely abolished the inheritance tax.

3) Wealthy people are very sensitive to inheritance tax. Most rich people will move their tax domicile to a place where they are not impacted by an inheritance tax. So you could expect that a wealthy Thai person would move their tax domicile for instance to Singapore which doesn't have an inheritance tax.

[retarius]

Tax the rich elite and at 40% to be competitive with other nations.

[bkkgooner]

Thailand really needs to sort out their tax system, how about actually encouraging people to pay their taxes by providing with better public services

[tingtong]

I just wish that this tax could be our problem, but it isn't!!

my F-I-L has maybe 2 million total asset, and even that is nothing more then some now hyped up higher then should be priced Isaan land.

divide for 3 kids....but wait, not one say a grandchildren cant inherit, so, throw in those too in the will if in the need to lower the tax....

I wish it would be over 50 million my wife could once inherit, and we would be glad to pay the 10% tax!

As I am sure most thai would be too!

It is funny that the article refer to SME as that were the common ppl here, with each such business valued to over 50 million thb, and have a single inheritor.

Even in the amphur town I don't think there is a single business here that worth 50 million thb, that includes the recently set up 7/11, and Tesco Express...not to mention the mom-and-pop hardware store, the few open-air restaurant selling basic food, or the hairdressers.

and again, most thai families there is more then one eligible inheritor...

if something, I would for one lower the limit, because this tax will only reach some very rich ppl, if any

[Briggsy]

Thailand taxation system is an example of a 'regressive taxation system'. Through VAT and heavy taxation through excise duty of every day items such as soda, fuel, vehicles and 'sin taxes' on alcohol, cigarettes, etc., the tax burden falls more heavily on the poor.

This is unsurprising as many systems in Thailand are there to benefit the privileged minority.

It will be interesting to see how much is actually raised by the introduction of an inheritance tax. I am sure the wealthy will easily avoid it. I am not even convinced it will be brought in.

[whybother]

Taxing the dead!

I am sure this is going to make Thais even happier!

Monies earmarked for such things as education .

Yeah right!

Education of the great grand children?

You don't think 45 million baht is enough for a kid's education?

[CapFarmer]

Fix the Thai tax system and stop the leaks from gov't treasury into private bank accounts of senior leaders!!!

[Thai at Heart]

I think the issue is 50mn for a starting value.

This will mean that 99.99999999999999% of all Thai people won't get effected by this one satang. It is a very high threshold, and they will have to pay 10%. Maybe they should mitigate it by saying that they can pay the 5mn or buy one Mercedes valued at 1mn with duty of 5mn. Job done.

[Fab5BKK]

article full of "mistakes"

"On the other hand, some said the maximum rate of 10 per cent on inheritance was low compared with some countries like Switzerland (55 per cent), Japan (50 per cent) and France (45 per cent)" The Nation

Since when Swiss, French Direct Descendants have to pay this kind (or level) of inheritance tax???

PS: Inheritance tax is wrong, specially towards "the salary man". The wealth built over years it's the money left after income tax, local taxes, VAT, excise taxes, etc.

[slapout]

This is the lead up to handing in a late assignment with all the problems they see before even starting to write the rules/regulations. Include foreign bank accounts/assits and really scare those who may be affected. Then add as penality, forfiture of the entire estate if any attempt is made to avoid paying tax, or failure in declaring any/all assits. If you want to raise government income get in a real taxing mode, screw everyone.

[Robert24]

@Fab5BKk: agree with you about the quality of this article. in Switzerland there is no inheritance tax for direct descendants. In France however the inheritance tax is very high which is the reason why many rich French have left France. And everyone can see that the economy is not doing well because people don't want to invest anymore. if Thailand wants to copy that model with the rationale to reduce wealth/income inequality, then go ahead. You see what happened in France.

[rickirs]

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@Fab5BKk: agree with you about the quality of this article. in Switzerland there is no inheritance tax for direct descendants. In France however the inheritance tax is very high which is the reason why many rich French have left France. And everyone can see that the economy is not doing well because people don't want to invest anymore. if Thailand wants to copy that model with the rationale to reduce wealth/income inequality, then go ahead. You see what happened in France.

And with a little bit of luck, will all the military flag officers then leave Thailand? No one left to make coups.

[icare999]

fair only problem is UK inheritance tax was meant too nay touch real wealthy but now anything over in Thai money around 15 million baht its 40% hardly wealthy is it and even more unfair if id left that in UK my Thai wife and kids would have paid 40% since my thai wife is not uk resident. SO i left UK and moved most of my assets to my This wife here and out of UK. Were not by any means wealthy but if id left assets in UK my family here would suffer a great deal.

[SantiSuk]

Inheritance tax is an inadequate sticking plaster/excuse for society not having sorted out a fair distribution of wealth through taxation and enforcement of taxation during working and living lives.

Edited November 15, 2014 by SantiSuk

[maidee]

mister i just give away 500 million, will impose this crappy tax on everybody else, except off course, himself & his friends in high places

will we soon see the thai version of the typical nigerian scam ?

dear Khun Farang

,

I just inherited 50 million baht, but the governement is asking to pay 10% upfront...

if you were so kind to send me 5 million baht on my bank account, I am hapy to share the wealth 50/50 with you

555555555555555555

Edited November 16, 2014 by maidee