Govt urged to push for tax reforms

“We’d like to propose that Thailand’s tax structure be based on a comparative study of tax rates in other countries, particularly Asean,” Payungsak Chartsutipol, chairman of the Federation of Thai Industries, said yesterday.

At a seminar hosted by a foundation promoting legal reforms, government officials, scholars and private-sector representatives agreed that broad reform is necessary, ranging from tax privileges from the Board of Investment and incentives to individual taxpayers to corporate-income-tax rates.

Payungsak, along with Thitipan Chuaboonchai, director of Chulalongkorn University’s law research centre, and Somchai Sajjapongse, director-general of the Finance Ministry’s Fiscal Policy Office, concurred that the national committee would help bring to fruition the long-awaited reforms.

Payungsak said the private sector and the general public had to take part in the process, as when Thailand transformed trade-related taxes into the value-added tax in 1992. They would come up with proposals, then the independent national committee would screen the proposals and come up with final recommendations.

To ensure fairness, the government should also consider setting up a separate unit to handle tax appeals. At present, tax-collecting units are handling the appeals, which are filed against their own rules and actions.

To make the reform business-friendly, clarity should also be a focal point. For example, it’s not clear if the 20-per-cent corporate tax rate will become permanent after 2014.

“This committee will help push for a balanced tax structure,” Thitipan said.

The tax structure is biased towards investors in the stock market, as they are exempt from capital-gains tax. While the top individual tax rate is 37 per cent, some individuals are at only 28 per cent because their income is from the stock market, he said. 

Long-term equity funds – now a main driver of the stock market – have been criticised for benefiting only some taxpayers. 

Somchai said the committee must be independent to get the overall picture of the tax structure. 

Tax-related agencies have their own proposals, but the committee should treat this as part of the process, he said.

The Fiscal Policy Office believes the Board of Investment’s tax incentives for some industries – such as snacks, elastic rubber and socks – should be scrapped, as they are no longer supporting the economy, he said. 

The tax structure should be tuned to promote investment, include bringing all income earners into the system, and promote green conservation. 

“Abolishing BOI incentives for selected industries, which led to tax losses of more than Bt100 billion a year, would increase the government’s revenue. With higher tax revenue, the corporate tax rate could be further lowered to 15 per cent,” he said. 

In his keynote speech, Finance Minister Kittiratt Na-Ranong said his ministry was realigning several taxes for greater equality. Narrowing the individual tax rates of each income bracket was also under consideration.

“Without an adjustment, we face criticism over inequality after the adjustment in the corporate tax rate. But if we heed the criticism, our tax revenue will drop. We’re weighing this thoroughly. Still, I assure you here that nobody will be liable to higher taxes after the restructuring,” he told the audience. 

On the agenda is a regulatory amendment to allow married couples to file separate tax returns beginning with the 2012 fiscal year, to ensure gender equality, as ordered by the Constitution Court. 

Married couples may also be allowed to deduct expenses fully for children, as divorced couples can. At present, married couples must split the deduction of Bt30,000 per child in half, while divorcees can deduct Bt30,000 each from their taxable income. Kittiratt said this change would result in up to Bt1 billion in tax losses. 

The Revenue Department is also reviewing the deduction for donations to education and to research and development to allow taxpayers to deduct up to three times the donated amounts, from two times at present. 

Corporate and individual taxpayers may also enjoy higher deductions for donations to promote sports. The types of donations would also be expanded to cover materials and non-materials.

“It’s not bad to lose some tax revenue on deductions for the benefit of education, sports and research,” Kittiratt said. 

“The Finance Ministry’s aim is not to collect taxes, but to define a strategy to win private-sector cooperation in benefiting business and education. We’ll do this as soon as possible, preferably starting in 2013.”