SME taxation axe threatens to kill golden goose

[webfact]

OPINION

SME taxation axe threatens to kill golden goose

By The Nation

 

With huge fines and the threat of imprisonment looming, Thailand’s army of small businesses needs more time to adapt  

 

BANGKOK: -- The Revenue Department has turned up another hot spot for the government by issuing a stern warning to small and medium-sized enterprises (SMEs) that they could face a jail term of up to 20 years for failing to fully abide by new rules and regulations on taxation within the next couple of months.

 

The threat is similar to the one aimed at migrant workers and their Thai employers last month, when the government abruptly decreed hefty financial penalties as well as prison terms for those found violating the new foreign-labour law. Thai employers suddenly found themselves facing fines of up to Bt400,000 per migrant worker and/or time in jail if they failed to fully comply with the law.

 

The stringent measure, though an excellent step towards Thailand’s international commitment on labour laws, was announced hastily and without the transition period that would have allowed businesses and migrant workers to adjust. The resulting exodus of workers caused chaos in sectors of the economy with a high dependence on migrant labour. Prime Minister Prayut Chan-o-cha was eventually forced to postpone enforcement of the new law by six months to allow more time for all parties concerned to prepare.

 

The principles behind the Revenue Department’s new announcement on SME taxation are likewise sound, since tax revenue and its efficient collection are the key component of the government’s fiscal resources. However, it is highly unlikely that hundreds of thousands of SMEs will be able to get their act together in just a few weeks.

 

SME businesspeople and auditors report they have been warned by authorities that the tax law would be strictly enforced from October 1, the start of fiscal year 2018. From that date, a single violation – such as use of illicit documentation to deduct business expenses and thereby pay less or no income tax – could lead to a seven-year jail sentence on top of a hefty fine.

 

The news triggered an outcry from accounting firms and auditors who handle accounts for SMEs, since they will be subject to similar punishment. The government’s intention to strictly enforce the Revenue Code is laudable in principle. But the devil is in the deadline: more time should be given for the parties concerned to make the necessary adjustments.

 

Unless the grace period is extended from the current two months or so, to at least the start of 2018, SMEs across the country will suffer.  In the meantime, more seminars, public relations and other educational campaigns would familiarise old-fashioned SMEs – which often tend to evade taxes – with the new legal and ethical standards being set by the government for a more sustainable economy.

 

At a rough estimate, some 60 per cent of Thai SMEs are run according to traditional business practices, with a variety of methods employed to either evade tax or avoid paying it altogether. However, the taxation ecosystem is changing rapidly thanks to the ever-widening use of electronic payment methods. Soon it won’t be possible for these businesses to survive for long without paying proper tax.

Accordingly, the older generation of small-business owners must now adapt to a new and unfamiliar world of transparent taxation, and they deserve time enough to reform old habits, rather than being slapped with an abrupt warning of imprisonment. In the end, it the government is unwise if it thinks it can issue such a threat without doing serious damage to the golden goose.

 

Source: http://www.nationmultimedia.com/detail/opinion/30321351

 

-- © Copyright The Nation 2017-07-21

[ukrules]

It's a very special time to be alive when a government makes two massive changes within weeks of each other which both have the potantial to completely and utterly destroy an entire countries economy and drive inflation through the roof.

 

I suggest paying attention over the next few months, this along with the colossal immigration issue when it comes back on Jan 1 next year is going to be a once in a lifetime kind of spectacle.

[SABloke]

"Accordingly, the older generation of small-business owners must now adapt to a new and unfamiliar world of transparent taxation, and they deserve time enough to reform old habits, rather than being slapped with an abrupt warning of imprisonment."

Give me a break! They've been committing tax fraud for yeara and now we have a bleeding heart telling us how we've got tp give them time to adjust. Adjust to following the law? That's the problem with this country....everyone breaks every law, because you're NEVER accountable (unless you take drugs....then you're pretty screwed)

[HiSoLowSoNoSo]

I can understand why people don't want to pay taxes that the military and political elite use as their own piggybank.

[YetAnother]

46 minutes ago, webfact said:

fully abide by new rules and regulations on taxation within the next couple of months.

heavy hand of a military dictatorship; and amazingly it is getting worse

[SABloke]

I can understand why people don't want to pay taxes that the military and political elite use as their own piggybank.

Fair enough...as long as these people that don't pay taxes don't drive on any (badly constructed or not) public roads, use any government hospitals, turn on their taps etc. etc.

[SABloke]

heavy hand of a military dictatorship; and amazingly it is getting worse

What's the penalty for tax fraud where you come from? Is it a military dictatorship too?

[jaywalker]

Why any citizen or expat in Thailand thinks "Paying Taxes" is something noble, is beyond me.

 

90% gets wasted on the bureaucrats collecting it. 

 

5% goes into local mayors' & cops's pockets, & 5% might just maybe get spent for the good of the sheeple. Someday, maybe.

 

As for roads... 

 

 

Edited July 20, 2017 by jaywalker

[jaywalker]

8 minutes ago, SABloke said:

 

Fair enough...as long as these people that don't pay taxes don't drive on any (badly constructed or not) public roads, use any government hospitals, turn on their taps etc. etc.

 

That's great. I can urinate with more pressure than comes out of most local tap water supplies.

 

 

[yellowboat]

1 hour ago, webfact said:

paying proper tax.

Who decides what is proper ?  Paying taxes in Hong Kong and Singapore, you get a government that runs at amazing efficiency.  Taiwan and Malaysia are pretty good.  

 

Given that graft is a common problem in Thailand, it is hard to decide what is proper.  The above mentioned have tax rates of 17 -19%, but you can see things getting done beyond bike lanes and beach chair organization. 

[jaywalker]

4 minutes ago, yellowboat said:

Given that graft is a common problem in Thailand, it is hard to decide what is proper. 

Not that hard.

 

Don't break the law (evasion), but AVOID all taxes whenever & wherever you can, the world over.

[SABloke]

My view is that when something like this pops up it is made to sound like some poor mom and pop stores are going to be in trouble and the evil government is going to ruin their lives, but the fact is that even as an individual (with the 0 -150k exemption and 60k personal deduction  to start) you have to earn at least 600k per year before your effective tax rate goes above 0%. These aren't the poor people of the country, but the poor people are the ones that benefit (however little) from badly run government enterprises. Now sure, why don't we ALL just stop paying tax and there won't be ANY services for these people. 

[jaywalker]

1 minute ago, SABloke said:

My view is that when something like this pops up it is made to sound like some poor mom and pop stores are going to be in trouble and the evil government is going to ruin their lives, but the fact is that even as an individual (with the 0 -150k exemption and 60k personal deduction  to start) you have to earn at least 600k per year before your effective tax rate goes above 0%. These aren't the poor people of the country, but the poor people are the ones that benefit (however little) from badly run government enterprises. Now sure, why don't we ALL just stop paying tax and there won't be ANY services for these people. 

It would devolve to *gasp* Market Forces.

 

I worked with (not for) a Thai defense contractor once.

 

He had a dozen people doing all the paperwork just to submit a bid.

 

I miss the days of no paved roads & no national income tax.

 

Local tax is fine.

 

Did you know the American Revolution came about over a 3% tax imposed by King George?

 

The was no income tax in the USA till 1913 (I think), and now it's about 35-40% so we can dive drones to drop bombs on men in caves.

 

In Thailand it takes 3 years (going on 4) to install an underpass in Pattaya.

 

Call a cop in Thailand if your house was broken into.

 

Gotta give him 1500 baht to even come to your door.

 

 

[SABloke]

Just now, jaywalker said:

It would devolve to *gasp* Market Forces.

 

I worked with (not for) a Thai defense contractor once.

 

He had a dozen people doing all the paperwork just to submit a bid.

 

I miss the days of no paved roads & no national income tax.

 

Local tax is fine.

 

Did you know the American Revolution came about over a 3% tax imposed by King George?

 

The was no income tax in the USA till 1913 (I think), and now it's about 35-40% so we can dive drones to drop bombs on men in caves.

 

In Thailand it takes 3 years (going on 4) to install an underpass in Pattaya.

 

Call a cop in Thailand if your house was broken into.

 

Gotta give him 1500 baht to even come to your door.

 

 

Hey, I'm all for it (in theory). I don't like governments and honestly believe the world would have been better with no organised governments and religions BUT I accept that I live in the real world and real people will be affected if suddenly all government services stopped. We didn't create the monster, but he's here to stay.

[jaywalker]

4 minutes ago, SABloke said:

Hey, I'm all for it (in theory). I don't like governments and honestly believe the world would have been better with no organised governments and religions BUT I accept that I live in the real world and real people will be affected if suddenly all government services stopped. We didn't create the monster, but he's here to stay.

True enough, but there seems to be a new monster that takes over (with military force) every few years in Thailand, and wants to re-write the 4,000 page constitution.

 

In the USA, we just have an obscure agency that writes about 350 pages of new laws into existence every DAY! Gotta give those bureaucrats SOMETHING to do!

 

You can barely sneeze in the US without committing a felony, so yes, Thailand's chaos is appealing in many ways.

 

"It's not only hopeless, it's hilarious" - Doug Casey

[Cadbury]

2 hours ago, webfact said:

SME taxation axe threatens to kill golden goose

The golden goose is invincible. It cannot be killed. Because the golden goose is Thailand's hidden economy which is claimed to be one of the biggest in the world. Here is a fascinating story headed ....Thailand’s Shadow Economy Among Biggest Globally.

 

Opening paragraph is a wonderful teaser and says:

Ever wondered why Thailand isn’t simply falling apart in its endless spiral of corruption, military coups, over-challenged governments, volatile economic environment, substandard education and poor law enforcement? It’s the shadow economy, stupid.

A "must read" story if you want a good laugh and have it confirmed what you already know.

I love this comment..."The junta says its crackdown on corruption has disrupted black money flows and thus slowed down the economy, which is a quite bizarre rationale"

http://investvine.com/thailands-shadow-economy-among-biggest-globally/

 

 

Edited July 21, 2017 by Cadbury

[mikebell]

57 minutes ago, jaywalker said:

Call a cop in Thailand if your house was broken into.

 

Gotta give him 1500 baht to even come to your door.

The officer in Jomtien wanted 10,000 to lever his fat arse from behind his desk when a car was stolen.

[Topdoc]

People could turn around and say: 
"Pay us the 10% interest we used to get on our bank deposits and we will happily pay the tax"

 

You have to look at all parts of the equation if you want to be high and mighty on this subject

[moe666]

Reading the commits here people do not understand the Thai Taxation system. My wife worked at a small business here in Chiang Mai which brought in around 300,000b a month, they held promotions for various products, which usually consisted of parties for there best members and their guest. My wife told the boss to take photos for the proof of the promotion. Her boss waved her off saying we have all of our recipts. Well Mr. tax man shows up inspecting the books and ask about the promotions. The boss says you have our recipts what else do you want, Mr Tax man says I do not believe you these could have been faked. Well add another 100,000b to the taxes already paid.

 

Many of these businesses already pay taxes as well as extra to satisfy the Tax man for more revenue.

[moe666]

1 hour ago, Cadbury said:

The golden goose is invincible. It cannot be killed. Because the golden goose is Thailand's hidden economy which is claimed to be one of the biggest in the world. Here is a fascinating story headed ....Thailand’s Shadow Economy Among Biggest Globally.

 

Opening paragraph is a wonderful teaser and says:

Ever wondered why Thailand isn’t simply falling apart in its endless spiral of corruption, military coups, over-challenged governments, volatile economic environment, substandard education and poor law enforcement? It’s the shadow economy, stupid.

A "must read" story if you want a good laugh and have it confirmed what you already know.

I love this comment..."The junta says its crackdown on corruption has disrupted black money flows and thus slowed down the economy, which is a quite bizarre rationale"

http://investvine.com/thailands-shadow-economy-among-biggest-globally/

 

 

A good article but it didn't add anything new about Thailand. If you have been here for anytime you know  alittle bit about how it works.

[PremiumLane]

2 hours ago, SABloke said:

 

What's the penalty for tax fraud where you come from? Is it a military dictatorship too?

 

If you are the super-rich or a corporation, sod all, and you get a helping hand from the government too

[YetAnother]

4 hours ago, webfact said:

However, it is highly unlikely that hundreds of thousands of SMEs will be able to get their act together in just a few weeks.

or even Know about the changes

[worgeordie]

Just when i thought i saw the light at the end of the tunnel,

turned out to be a Taxman with a torch.

regards worgeordie

[Retiredandhappyhere]

6 hours ago, SABloke said:

My view is that when something like this pops up it is made to sound like some poor mom and pop stores are going to be in trouble and the evil government is going to ruin their lives, but the fact is that even as an individual (with the 0 -150k exemption and 60k personal deduction  to start) you have to earn at least 600k per year before your effective tax rate goes above 0%. These aren't the poor people of the country, but the poor people are the ones that benefit (however little) from badly run government enterprises. Now sure, why don't we ALL just stop paying tax and there won't be ANY services for these people. 

How do you arrive at your 600000 income figure as effectively being subject to nil tax?  My understanding is that an unmarried individual in business gets a personal allowance of 30000 only plus nil tax on the next 150000, leaving 420000  as taxable, as follows:

  next        150000 mat 5%  =   7500

  next        150000 at 10%    = 15000

  balance  120000 at 15%    = 18000

 

Total Tax                                = 40500

 

I would be interested to see your own calculations.

[SABloke]

How do you arrive at your 600000 income figure as effectively being subject to nil tax?  My understanding is that an unmarried individual in business gets a personal allowance of 30000 only plus nil tax on the next 150000, leaving 420000  as taxable, as follows:   next        150000 mat 5%  =   7500

  next        150000 at 10%    = 15000

  balance  120000 at 15%    = 18000

 

Total Tax                                = 40500

 

I would be interested to see your own calculations.

 

 

New updated tax effectove from 2017 has doubled the personal deduction to 60 000 Baht.

 

I was doing guestamatics sitting in the back of a taxi. Your figures are accurate (With adjustment for 60k of course)