Thai govt urged to defer increase in VAT

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VAT
Govt urged to defer increase in VAT
Petchanet Pratruangkrai
The Nation


Supant Mongkolsuthree

BANGKOK: -- The recommendation was agreed upon by the Joint Standing Committee for Commerce, Industry and Banking at its recent monthly meeting.

Thailand's leading private organisations are urging the government to delay the planned increase in value-added tax next year, saying that Thais will not be ready to pay more during what is expected to be a slow economic recovery.

In an attempt to convince the government to defer the VAT hike, the organisation plans to discuss the issue with Prime Minister Prayut Chan o-cha during the next meeting of the Joint Public and Private Committee.

Business operators and the private-sector standing committee expect the Thai economy will grow by just 3.5-4 per cent next year, lower than the previously forecast range of 4-4.5 per cent, said Supant Mongkolsuthree, chairman of the Federation of Thai Industries.

If the economy does not grow above 4 per cent next year, then the government should consider delaying the VAT increase, as it could affect consumer spending power, he said.

The government may just be wanting to "see how the wind blows" by saying that it will increase VAT, but it may not raise it in the final analysis, he added.

"The Thai economy will show a clearer sign of recovery after the second quarter next year following the government's infrastructure investment, which will start to be effective and inject funds into the economy. The government should, therefore, delay increasing VAT for a year," he suggested.

His comments came after the Prayut government announced that it planned to increase VAT by at least 1 percentage point in October next year. The current rate is 7 per cent.

Somkiat Anuras, vice chairman of the Board of Trade of Thailand and the Thai Chamber of Commerce, said he disagreed with the proposed hike as the Kingdom still faced weak consumer spending power.

The government should wait for a while, until the economy has grown more strongly, he suggested.

Boontuck Wungcharoen, chairman of the Thai Bankers' Association, said the government should carefully consider whether to increase VAT as consumer purchasing power was still not strong.

He pointed out that household debt had been rising, while spending on durable goods remained low.

For next year, the private sector foresees the tourism sector growing by 7 per cent, while exports are forecast to expand by 3 per cent.

Overseas shipments next year should grow mainly due to the economic recovery in the United States, but there is still risk in Japan, he said.

The committee projects that the Thai economy this year will face a contraction of 1 per cent, or at best grow by just 1 per cent, due partly to the need to make payments of Bt1,000 per rai (0.16 hectare) to rice and rubber farmers.

Meanwhile, the panel supports the government's planned promotion of Thailand as a hub for corporate regional headquarters, because such a move would increase employment opportunities for Thais, and stimulate the MICE (meetings, incentives, conventions and exhibitions) industry and tourism-sector growth.

The panel will gather more ideas from the private sector and make proposals to the government at a later date.

It will also set up a working committee to study which business-related laws require amendment, and then submit proposals to the National Legislative Assembly.

Source: http://www.nationmultimedia.com/business/Govt-urged-to-defer-increase-in-VAT-30249032.html


-- The Nation 2014-12-03

[ezzra]

Yesterday I have bought one serving of Som Tam to go, 40 baht and half the amount of the stuff I use to get

this was bought at an Issan shop and not up market place, things are getting more expensive

by the day here and I'm not sure how, by rising the vat or any related tax can elevates this situation,

and it's only going to get worse...

[chainarong]

By increasing the VAT all you are doing is penalising the poor 80%, it might start at an extra 1% but could end up being another 10% on prices as costs incurred , not a great way to win friends in this financial difficult times ( C Russian is going into recession) , anything that includes banking industry recommendations I would be highly suspicious of.

[Chang_paarp]

Yesterday I have bought one serving of Som Tam to go, 40 baht and half the amount of the stuff I use to get

this was bought at an Issan shop and not up market place, things are getting more expensive

by the day here and I'm not sure how, by rising the vat or any related tax can elevates this situation,

and it's only going to get worse...

I am pretty sure that your som-tam disappointment has little to do with any change in VAT as most of those vendors do not pay much if any tax. As to the increase in price Vs reduction in quantity, that is how the vendors are able to comply with the government decree there will be no price rise. Next time ask for the 45B size and see if you get a better deal.

[Robert24]

Yesterday I have bought one serving of Som Tam to go, 40 baht and half the amount of the stuff I use to get

this was bought at an Issan shop and not up market place, things are getting more expensive

by the day here and I'm not sure how, by rising the vat or any related tax can elevates this situation,

and it's only going to get worse...

I don't think your som tam shop will pay VAT on the food you bought from them. Neither do they usually pay income tax. So this is inflation not tax related.

and btw, I suggest you buy your som tam from another vendor. I can recommend you plenty of places where you get a decent Som Tam for 30 baht in this country, especially in Isaan.

[Tatsujin]

Yesterday I have bought one serving of Som Tam to go, 40 baht and half the amount of the stuff I use to get

this was bought at an Issan shop and not up market place, things are getting more expensive

by the day here and I'm not sure how, by rising the vat or any related tax can elevates this situation,

and it's only going to get worse...

A few weeks ago we ran a little experiment out of curiosity with some local vendors "on the street" ... Thai friend ordered a meal, received it in 2 minutes, paid 40 baht, walked away happy ... foreigner friend then went to exact same stall 5 minutes later, ordered (in Thai, with no comprehension difficulties) the same thing, took 15 minutes to receive it (oh, so sorry, busy ... actually they continued to serve other Thai's instead in front of the foreigner), was charged 85 baht and the portion was about half what the Thai friend received and tasted like crap.

And if any of you here still continue to believe this doesn't happen here in the LoS and isn't getting worse daily, you've got your heads up your you know what.

[rickirs]

The recommendation is correct.

If the economy does not grow above 4 per cent next year, then the government should consider delaying the VAT increase, as it could affect consumer spending power. On 2014-12-02 Industry Minister Chakramon Phasukvanich projected economic growth next year was expected at between 3% and 3.5% following government’s remedial measures to subsidise farmers, and mega project spendings. Chakramon's estimate is optimistic as the latter has not been significant as yet to increase GDP. The NCPO is planning its stimulus after the 2015 Q1. The VAT needs to remain unchanged.

But there dilemma for the government is that income tax collections have been short by 20%-30% since 2013 to current quarterly withholdings. VAT is almost a guarantee for tax being collected at the point of retail sale and so is a logical choice for a quick equity fix for the government - it's easy money. Without an increase the government will need to market more government bonds if it expects to follow its stimulus plans for 2015. On the downside the interest will cost more budget but on the upside the baht (35-38/USD?) will become more attractive to exports and tourism.

There are no easy solutions to Thailand's economic recovery any more that it has been for many countries. But what is critical is action be taken and held to.

[kamahele]

They should be enforcing the collection of the current taxes before raising the rate. I don't know if saying "most" is an exaggeration or not but it seems that most small-medium vendors do not collect any tax so then are not paying tax back to the government.