Corporations offer to give up tax cut to aid SMEs
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Taking a leaf from Japan's tsunami-recovery book, the Thai private sector will propose that the government delay its planned cut in the corporate income tax rate and allocate the proceeds to help small and medium-sized enterprises (SMEs) hurt by the floo
A standing joint committee comprising the Board of Trade of Thailand (BoT), the Federation of Thai Industries (FTI) and the Thai Bankers Association yesterday held a special meeting to formulate a plan to help SMEs recover.
The committee will spend a period of time selling the plan to tax-paying corporations, including listed companies and foreign firms, before submitting its proposal to the government by the end of this month.
Honorary BoT chairman Pramon Sutivong, who chaired the meeting, said private corporations should forgo the tax cut to help SMEs recover from the severe floods. Funds equivalent to the amount the government had been expected to return to corporates in the form of a tax cut would instead be made available as loans to SMEs.
The Pheu Thai Party-led government earlier vowed to reduce the corporate income tax rate from 30 per cent to 23 per cent next year.
Pramon said the government could pass a Royal Decree to collect an amount equivalent to the planned 7-percentage-point cut from each corporate and contribute it to a fund to help relieve the burden on flood-hit SMEs.
“If it’s successful, the amount of the fund will be Bt70 billion-Bt80 billion,” he said.
The proposal was inspired by Japanese private firms’ initiative to help smaller companies affected by the March tsunami in that country, after Tokyo announced it would reduce the corporate tax rate from 40 per cent to 35 per cent.
“To urgently help SMEs, the government should postpone the corporate tax cut…so that it can collect the 7-percentage-point difference…and contribute it to the fund,” said Pramon.
The fund would provide loans to small firms that are facing difficulty accessing bank loans. Later, it could be used to help businesses affected by future disasters, he said.
“Many large firms [and organisations] such as [Siam Cement Group], PTT and the Japanese Chamber of Commerce are ready to sacrifice their income tax cut to help flood-hit SMEs,” he said.
He urged the government to respond to the plan and change its policy, which would see the corporate income tax rate fall to 23 per cent in 2012 and to 20 per cent in 2013.
Before officially proposing the agreement to the government, Pramon said the committee will continue to seek an agreement among private firms who would be affected by the delay in the tax cut.
The FTI and BoT will negotiate with affected companies and the Joint Foreign Chamber of Commerce, which includes the UK, Australian and US chambers, to create understanding among foreign investors for the need for Thailand to continue to collect the full corporate tax, he said.
FTI vice chairman Thanit Sorat said the government must focus on the benefit to the public of delaying the tax cut, rather than on its political agenda.
If private firms agree to forgo some benefits, the government should be prepared to review its plans as well, he said. Thanit added that the government should also consider delaying the implementation of the Bt300 daily minimum wage from April in order to help relieve the burden on businesses affected by the flooding.
