Review of tax allowances urged
The Revenue Department has proposed a review of tax allowances offered to savers as the department is under a lot of pressure to collect more tax to make up for the drop in revenue resulting from a big cut in the corporate tax rate.
The department is looking to review tax allowances for people investing in Retirement Mutual Funds (RMF) and Long Term Equity Funds (LTF) and may impose maximum ceiling, Satit Rungkasiri, director general of the Revenue Department, said on Friday.
Currently, people who buy life insurance, can get a tax allowance of up to Bt100,000 of a life assurance premium they pay annually.
Those who make contributions to a provident fund or RMF can get a tax allowance of up to Bt500,000 and those who invest in LTF get allowances up to Bt500,000.
Satit said the department may impose a ceiling on combined savings: RMF, LTF and other channels. Taxpayers could, for example, get a maximum allowance for savings of Bt700,000 a year, he said.
Tax allowances for RMF and LTF no longer boost savings among taxpayers so there was no need to give too much of an allowance.
“We want to group various savings products and put a cap on tax allowance and allow taxpayers to choose only one saving product or many, but everyone can get maximum allowance up to certain level, such as Bt700,000 for instance” he said.
It would also be fair for financial service providers, as the current scheme is biased toward some providers, he said, pointing to the tax allowance on insurance premiums being limited at only Bt100,000.
He said the assurance industry was active in promoting saving. He expressed doubt on whether mutual fund managers work hard to promote savings. He said the department may cut tax allowances for RMF and LTF if the industry is not active doing this. Tax allowances for LTF will expire in 2016, and some people think Finance Minister Kittiratt Na-Ranong who was formerly a stock exchange chief, may extend the tax incentives. But it may not be the case, he said.
The department will consult with other parties before making a move, he added. Economists have long suggested the department reduce tax exemption and credit and urged to increase valued-add tax rate from 7 per cent to 8 or 10 per cent.
The government has cut corporate income tax from 30 per cent to 23 per cent this year and plans to cut further to 20 per cent next year, which will result in a revenue drop while it runs fiscal deficits.
