The Revenue Department is ready to cut the corporate income tax rate, though it is also proposing a rise in the value-added tax (VAT) rate, says Satit Rungkasiri, director-general of the department.
The department will implement the tax policies promised by the Pheu Thai Party, which will lead the new coalition government, he said.
The party plans to cut corporate income tax from 30 per cent to 23 per cent immediately when it takes office. It later plans to cut the rate to 20 per cent.
The tax cut is part of the new government’s efforts to lower costs for businesses that will be affected by its minimum-wage rise policy
Satit said the cut could result in revenue losses of Bt150 billion per year.
The cut will attract foreign direct investment and the new tax rate will be in line with rates in other Asean countries, said Satit.
Among Asean countries, only the Philippines and Thailand collect corporate tax at the high rate of 30 per cent of firms’ profits.
The Pheu Thai Party does not propose to increase the VAT rate. Satit, however, suggested that the new government should increase VAT, saying the current rate of 7 per cent was relatively low.
VAT should rise when the economy expands, said Satit.
“More countries are raising VAT rates. VAT is an important source of government revenue and most countries impose VAT rates ranging from 10 per cent to as high as 30 per cent,” said Satit.
Japan and South Korea collect the lowest VAT rates of 5 per cent, Satit said.
The VAT rise would not hurt the poor, since VAT is exempted on necessities, though it will affect the rich, who consume more goods and services than the poor do, said Satit.
He said the department also planned to increase tax revenues by improving information links between the Bank of Thailand and the Commerce Ministry, allowing the department to access real-time information about business transactions.
Tax revenue is currently about 16 per cent of gross domestic product (GDP). The level of tax income is relative low, given the current stage of economic development as a middle-income country.
Satit said tax receipts should reach as high as 20 per cent of GDP, enabling the government to finance its promised projects.
The department this year expects to collect Bt180 billion more tax revenue than targeted, due to a solid economic recovery, he added.
Many economists have expressed support for the idea of a VAT rise to 8-10 per cent.
Source: The Nation