Inheritance levy could raise Bt300 bn

Levying an inheritance tax on the 50 richest billionaires could earn the government Bt300 billion, a study showed yesterday.

Duangmanee Laowakul, an economics lecturer, told a seminar held by the economics faculty of Thammasat University that another proposed new tax on land and property would likely increase government income by Bt30 billion to Bt40 billion annually. However, the impact on land distribution and holdings will be minimal at the initial stage since the tax rates are low and the actual collections might be lower that what is stipulated in the law.

“Nevertheless, if the tax is actually collected at the maximum 4-per-cent rate, it may help reduce some land hoarding,” she said.

As for the inheritance tax, collecting it from the 50 richest persons would theoretically generate nearly Bt300 billion in state revenue but in reality, billionaires may find ways to evade these taxes, said the academic.

The inheritance tax will not reduce inequality much since there are no progressive rates. It will affect billionaires more than millionaires. The government also needs to introduce other levies such as the property taxes in parallel, otherwise billionaires will move their money to other assets.

Pipat Luengnaruemitchai, assistant managing director of Phatra Securities, told the seminar that he agreed with the government’s plan to collect both new taxes but it should consider the cost of collecting them, since if these expenses are high, they could negate any net state income. Furthermore, it should consider consequent create distortions in the economic system as well as how to close tax-collection loopholes.

There are concerns about how land and property will be appraised for tax purposes, which should rely as little as possible on state officials’ judgement, to avoid corruption. Another concern is that the proposed taxation might affect investment decisions on existing land plots. Thus the government should separate land and property tax collections, he said.

“Nevertheless, I’m not sure if this law will be passed, since the men who will vote also hold many pieces of land,” he said. 

Pipat said the cost of collecting the inheritance tax would be high, and if the tax rate is also high, that will increase the incentive for tax avoidance. This can be done in many ways such as through changing heritages into jewellery or precious metals, which is hard to investigate. 

Moreover, before the law is passed, billionaires will quickly transfer their heritages to their children. Or, billionaires can transfer their assets to other countries, and though they might be subject to withholding tax, the cost of inspections and collections will be high and billionaires will end up with a low tax burden, perhaps less than Bt50 million, he said.