BANGKOK, Thailand – The Permanent Secretary of the Ministry of Finance, Mr. Lawaron Saengsanit, announced a comprehensive plan to reform Thailand’s tax structure. Key measures include reducing the corporate income tax rate to 15% and shifting the focus toward increasing property and consumption taxes. The aim is to strengthen the Thai economy, address structural weaknesses, and achieve a GDP growth rate of 5%, on par with neighboring countries.
Structural Challenges Hindering Growth
Mr. Lawaron highlighted several structural challenges that have caused Thailand’s GDP to grow at a rate below its potential. Despite global recovery from the COVID-19 pandemic, where many countries saw GDP growth exceeding 5%, Thailand’s economy expanded by only 2%. Contributing factors include high household and public debt levels, low private sector productivity, and weakened consumer purchasing power, which collectively impact government tax revenues.
The Ministry of Finance plans to address these challenges through short-term measures and economic restructuring. These include strategic borrowing to fund essential recovery efforts while maintaining the country’s credit rating, ensuring fiscal sustainability, and paving the way for balanced budgets in the future.
Tax Reform Highlights
To support these goals, the ministry is developing a new tax structure that aims to boost economic strength without causing a shock to the economy. Key elements of the reform include:
Corporate Income Tax Reduction:
The corporate tax rate will be lowered from 20% to 15% to align with international standards set by the OECD (Organization for Economic Cooperation and Development). This measure is also intended to enhance Thailand’s competitiveness with regional economies like Singapore.
Property and Consumption Taxes:
The ministry proposes increasing taxes on consumption and wealth. Consumption taxes, such as VAT, will apply uniformly to all citizens regardless of income. However, measures will be introduced to provide financial support to vulnerable groups, ensuring their spending power remains intact. For example, if VAT increases, 30% of the additional revenue will be allocated to aid low-income earners, with the remaining funds directed toward national development.
Property taxes will target accumulated wealth, encouraging fairer contributions based on individual wealth levels.
Expanding the Tax Base:
Over the past decade, the number of individual taxpayers has grown modestly, from 10 million to 11 million people. This slow growth highlights the need for a broader tax base. Currently, individuals earning less than THB 150,000 annually or approximately THB 28,000 monthly are exempt from income tax, with various deductions and exemptions further limiting tax contributions. The ministry aims to reassess these policies to create a more equitable tax system.
Digital Transformation for Efficiency
To modernize tax administration, the Ministry of Finance is leveraging Big Data and artificial intelligence (AI) under the “Ari Score” model. This initiative integrates multidimensional data analysis to better understand the behavior of Thai citizens, enabling targeted economic policies. The goal is to improve the efficiency of tax collection and streamline public welfare programs.
Negative Income Tax for Welfare Management
The ministry is also revisiting the concept of Negative Income Tax (NIT) to optimize welfare spending. Under this model, the government will maintain an up-to-date database of citizens’ incomes, updated every three months. Individuals whose incomes exceed the welfare eligibility threshold will automatically transition out of the welfare system and into the tax system. This approach reduces redundancy in welfare disbursements and ensures that only those in genuine need receive support.
Currently, 14.5 million citizens receive government welfare benefits, while 11 million file tax returns. The integration of AI and Big Data will enhance the accuracy of taxpayer data and improve the overall efficiency of fiscal management.
Global Collaboration on Tax Transparency
Thailand’s tax reforms also align with its commitment to OECD standards. From January 1, 2024, Thailand’s Revenue Department will participate in a global exchange of financial data. This initiative will allow Thailand to access information on Thai nationals’ overseas income and investments while sharing data on foreign nationals working in Thailand with other OECD member countries. This measure is aimed at curbing tax avoidance and ensuring compliance with international tax agreements.
The proposed reforms represent a significant step in addressing Thailand’s structural economic challenges, enhancing fiscal sustainability, and promoting long-term economic resilience. The Ministry of Finance remains committed to implementing these changes in a balanced and thoughtful manner to minimize economic disruptions. (TNA)
