Individual income-tax cut gets Cabinet nod

Under an executive decree approved by the Cabinet yesterday, the number of income tax brackets will be expanded from five to seven during the 2013 and 2014 tax years, while the maximum tax rate was lowered from 37 per cent to 35 per cent.

Under the new income-tax brackets, those with taxable income below Bt150,000 a year will remain exempted from individual income tax. Those with taxable income of between Bt150,000 and Bt300,000 will be subjected to a 5-per-cent rate. Those with taxable income above Bt4 million will be subjected to the maximum rate.

Tax experts said that under the new income brackets, low-income taxpayers will save the most in percentage terms, while high-income earners will save the least. Earlier, former Revenue Department director-general Satit Rungkasiri said the change would dent the government’s tax revenue by Bt25 billion per annum. But as taxpayers pay lower taxes, this should boost domestic consumption and benefit the economy in the long term.

Moreover, the changes would make Thailand attractive for overseas workers, which is seen as crucial under the regional integration in Asean. 

Deputy Finance Minister Benja Louicharoen said the aim of the plan was to lower the tax burden and streamline the tax structure under current conditions. 

The move follows cuts in corporate tax to 23 per cent in 2012 and to 20 per cent in 2013, to draw more investment into Thailand. Thailand’s corporate tax rates are now in the middle of the Asean scale.

The measure’s approval comes at a time when the Thai economy is slowing. Fiscal Policy Office director-general Somchai Sajjapongse cautioned yesterday that the tax cut would boost economic growth by only 0.1 percentage point, as only 40 per cent of the tax reduction would be recouped.