Update on tax easings today

 

These include a duty waiver on machinery and raw-material imports from non-Asean countries, as well as rebates for flood-damaged raw materials. There is also a proposal to extend the period for loss deduction from taxable income by between one and two years from the current five years, according to a source at the Finance Ministry. 

“The ministry is ready to relax the rules as requested, to exercise fiscal capability to help business operators. We’ll discuss the package in detail, like the list of eligible raw materials and machinery. However, this assistance is only limited to affected factories,” the source said. 

Meanwhile, Somchai Sajjapongse, director-general of the Fiscal Policy Office, reiterated the Finance Ministry’s readiness to finance an overhaul of the water-management system. 

He insisted that with public debts of 41 per cent of gross domestic product, the country could borrow more to finance such major projects. 

An additional Bt400 billion could be borrowed before public debt hit the threshold of 60 per cent of GDP, he said. This excludes the ability to raise another Bt200 billion overseas and a debt guarantee to state enterprises worth about Bt100 billion. 

“Financing is not a problem. What we need is clarity of the projects and the amounts needed,” he said, adding that aside from Bt100 billion for short-term measures, the ministry could borrow more for other long-term projects. 

The Fiscal Policy Office estimates overall flood damage of Bt189 billion, or 1.8 per cent of GDP. This would lower this year’s GDP growth to 2.7 per cent, but the economy should expand by 4.5-5 per cent next year on a spike in investment and consumption, Somchai said. 

However, the office’s damage estimate seems optimistic when compared to that of Barclays. Rahul Bajoria, the bank’s Singapore-based regional economist, said in a research note that flood-related losses could reach Bt200 billion to Bt300 billion, equivalent to 2-3 per cent of GDP. 

“Historically, the economy recovers fast after disasters, with rehabilitation efforts for the manufacturing sector and a spike in consumption. Economic growth will resume, and will never be as low as 1 per cent,” Somchai said. One urgent task is to help farmers hit by the devastating floods, besides which unemployment should also be eased by government construction projects, he said. 

Despite supply-chain disruptions, the automotive and electronics industries will continue to drive exports, though aggregate export growth will drop slightly, from 23 per cent to 21 per cent, he added. 

“Though tens of billions [of baht] in tax revenue could be shaved off, this would be compensated by a recovery driven by consumption and government stimulus measures,” Somchai said.

Tisco Securities expects the floods to reduce fourth-quarter economic growth to 1 per cent, due to dismal figures on industrial output, exports, consumption and investment.