Deloitte exec warns of tax hassles under AEC

Auyporn Tanlamai, partner for tax and legal services at Deloitte, said that he was more worried about SMEs as they are the country’s economic foundation. He said SMEs were unprepared in several aspects for the Asean Economic Community (AEC). The AEC is scheduled to come into effect in 2015.

"Apart from following Thai regulations, SMEs may need to study much more about taxation for AEC. Most large-sized businesses have SMEs in their supply chains," he said.

While tariffs will be reduced to zero, Thailand’s income tax could become a hindrance for all Thai companies to have cross-border investment or trade, and tax-related laws may need reforms to allow businesses to compete with rivals from other Asean countries, he said.

The whole tax structure may have to be reformed to support Thai companies to make overseas investment and to encourage international businesses, Auyporn said.

The Thai Revenue Department still taxes a Thai individual working overseas whose income is paid locally, which leads to taxing of the same income twice. Investing overseas entails a lot of expenditure such as office rent, marketing and personnel expenses in the new market, and that raises concerns for tax authorities about their deductibility. The just in time exporter is taxed upon export of goods while the sale has not yet occurred.

The tax authorities need to review the tax law and regulations and revise them accordingly, Auyporn said.

In addition, the concerned authorities may also have to propose an overall plan for businesses or sectors needing tax promotion, Auyporn said, noting "their related industries may also need similar promotion".

Auyporn also expressed concern over other tax-related issues like tax revenue-sharing between importing countries and consumption countries which need proper mechanism for the sharing of tax revenue.

The greater economic integration under AEC provides not only opportunities for Thai enterprises to benefit from a much bigger market with an approximate 600 million population, but also the threat of higher competition from neighbouring countries.

Businesses may also face a web of non-tariff measures when shipping their products across borders, Auyporn said. These measures include trade-related procedures, regulations, standards, licensing systems and trade defence measures etc.

In the longer term, all 10 Asean countries may need to face similar tax schemes, for fairness and equality, Auyporn said.