Inheritance tax 'not enough': analysts

Analysts and economists welcome the planned introduction of an inheritance tax, which they say would help combat social inequality. However, the new tax should be incorporated with other measures guaranteeing redistribution of extra income to provide benefits for the less fortunate through increasing social welfare and job opportunities.

The Finance Ministry will propose the draft inheritance tax bill to the Cabinet for consideration at its meeting this week, with the ceiling rate expected to be 10 per cent for estates worth more than Bt50 million.

“I will try hard to push for the draft, which has already been considered by the Council of State, to be considered in the Cabinet meeting on November 12,” Finance Minister Sommai Phasee said. 

He said the proposed 10-per-cent rate was quite low compared with 40-50 per cent in other countries in the European Union and the United States. However, the exact rate would be decided later.

However, Deputy Prime Minister and Defence Minister  Pravit Wongsuwan said the Cabinet would not consider the draft inheritance tax bill at its meeting tomorrow.

Sommai yesterday clarified some details of the tax, which will be applied only to inheritances given after the donor’s death.

Legal heirs who receive more than Bt10 billion before the donor’s death will be subject to a 5-per-cent tax. Beneficiaries who are not heirs by the legal definition will be subject to annual personal income tax.

Thailand is not the first Asean country to impose an inheritance tax. The Philippines and Singapore tried in the past but eventually withdrew theirs. 

The expected ceiling rate in Thailand is lower than in Japan, South Korea and Taiwan, which all have a cap of 50 per cent.

Luxmon Attapich, senior country economist at the Asian Development Bank, said yesterday that levying the inheritance tax would be a symbolic move to help tackle social and economic inequalities because the main source of tax income would be the rich.

The introduction would need a more complete cycle for it to be effective against inequality.

“The introduction of the inheritance tax alone cannot solve the problem of inequality. The question is what the money would be used for, and the best way is to use it to fund and introduce other social-welfare measures to help the less fortunate people in society,” she said.

The current social welfare programmes such as universal healthcare and 15 years of free education are adequate, but the problem of the ageing of society needs to be looked at.

The government should consider the introduction of a social pension to help ease the greying problem before it becomes more severe in the future, she said.

Sirikanya Tansukun, senior analyst at the Thailand Future Foundation, said the inheritance tax could reduce inequality if the government used the extra income to provide job opportunities for the poor such as transport projects in rural areas, while coming up with measures to make sure that the super-rich are really being taxed by finding ways to close loopholes and eliminate grey areas.

The uber-rich often find ways to avoid paying inheritance tax since they have to pay the most. For example, they can transfer their registered assets into non-registered assets such as jewellery and gold or transfer their assets to an offshore account or investment to cover up how much wealth they actually have.

Some countries, such as Australia and New Zealand, have revoked their inheritance tax and replaced it with a capital-gains tax for this reason. 

Britain is having problems with high costs in managing collection. It has spent about Bt5 billion in the past five fiscal years to trying to track down the assets of the rich who are hiding their wealth overseas.