Finance announces three priorities

The Finance Ministry yesterday laid down three priority policies to strengthen the country’s financial fundamentals – urgently boosting the economy, reining in public debt, and refining the tax structure – while hoping they will be continued by the elected government expected in about a year.

Sommai Phasee, the new minister, said there was a definite need to stimulate the economy through public investment and the country had the financial capacity to accomplish that. 

Public debt is still at a “manageable” level, the central government still has a large leftover budget from last year, and the Bt350-billion budget for local governments to invest that has yet to be disbursed because of the political turmoil can be used straight away.

The economy has not recovered as fast as expected. However, this year should still see an expansion despite the contraction of 0.5 per cent in the first quarter. Growth in the final quarter should be much better than 2 per cent. 

“I am a straightforward person. I believe that it would be a blessing if the economy could grow by 2 per cent this year,” he said.

The central government, local governments, state enterprises and special administration zones such as Bangkok have to work together to rev up the economy through investment, he said. There are some small projects that have been long studied and can be commenced right away in the first quarter of the next fiscal year beginning on October 1. 

“We have talked much about investment and we have to start now,” he said. 

“Other countries such as some in Europe have limitations. They are facing a dead-end, since their budgets are at the limit and their public debt has exceeded 100 per cent of gross domestic product. 

“Our country, with the same basics, has  … about 47 per cent debt to GDP, which makes me happy, since we have room to invest and our financial situation is stable,” he said.

Two ways to manage public debt would be to issue bonds and to promote public-private partnerships to lower the cost burden of new investment projects. Both plans are undergoing research and the details will be revealed once the study process is complete.

As for the restructuring the tax system, right now the only “certain” thing is “uncertainty”. The ministry is looking at every option that has been proposed to it in terms of expanding the tax base and bridging the gap between the rich and poor through the introduction of progressive measures such as an inheritance tax and a real-estate tax.

Those two proposed taxes are “tangible” ideas that have taken shape the most, he said. However, it is still not definite that the ministry will introduce and implement both of them at the same time.

 The cancellation of tax incentives for long-term equity funds and retirement mutual funds is still being studied since ministry officials need to find out who are the biggest beneficiaries in both schemes – the rich or the poor.

Sommai has ruled out a national referendum on the introduction of the two new taxes, noting that an increase in the value-added tax by the end of next year is still one of the targets of the ministry.

When asked by a reporter if these grand plans can be met in one year, Phasee said, “you are right” that they might not be finished that quickly.

The prime minister has given his commitment and the current plans, if unfinished, can still act as a guideline and pave the way for the next government to follow as a strategy that can provide much-needed clarity on how the country will move forward from the current position, the finance minister said.