Govt urged to scrap overseas firms' tax
The Board of Trade will this week ask the government to reconsider taxation on Thai companies' overseas investment returns, saying that such rules are discouraging and not supporting expansion ahead of the Asean Economic Community.
Kitipong Urapeepatanapong, chairman of the board’s local tax laws committee, said the government should abolish the tax as has been done by many other countries.
Deputy Prime Minister and Finance Minister Kittiratt Na-Ranong recently decided to suspend amendment to the tax code because of fear of a reduction in tax revenue. The Abhisit Vejjajiva government had already endorsed the draft amendment to Royal decree No 442 on tax exemption, which would have exempted Thai companies’ repatriation from double taxation. At present, the returns are subject to a 28-per-cent tax, though the companies are fully taxed in the countries where they operate.
There are fears that foreign firms would also be discouraged from setting up holding companies in Thailand.
The Board of Trade wants the issue to be reconsidered, as abolishing the tax or granting an exemption would encourage more Thai companies to go overseas, in line with the government’s policy.
More overseas investment will help Thai companies diversify risks and balance capital flows. The association is of the view that without a change, Thai investors will not repatriate returns from overseas investments back home, as they would then face double taxation. With high taxes, Thai companies will lose competitiveness.
“The government will not gain any benefit by leaving the law unchanged. Thai investors will not bring back money to the Kingdom, in order to avoid the double taxation. They would rather stash the foreign income offshore,” said Kitipong.
Kitipong noted that at present, some Thai companies have deposited several hundreds of billions of US dollars overseas, mainly in Singapore and Hong Kong. Many countries have exempted taxation on overseas-generated income and they turn to tax havens. To attract more money into the country, Thailand needs to amend the regulations, he added.“Otherwise, Thai investors will set up holding companies in other countries and keep their money overseas rather than bring it back to the motherland,” he said
