Revenue Department requests 1-year extension of 7% VAT rate

Meanwhile, the tax-revenue target for the 2016 fiscal year has been set at about Bt1.8 trillion after 2015 revenue is expected to be Bt160 billion below target.

Prasong Poontaneat, director-general of the department, said it would propose an extension of the current VAT rate for one more year after its expiration on September 30, given the current economic situation. The extension would be aimed at promoting domestic consumption. According to the relevant tax law, the VAT rate should be 10 per cent.

When the time is right, however, the VAT rate will probably go up. Prasong said every 1-percentage-point rise in the rate should boost tax revenue by Bt150 billion. He also pointed out that Thailand’s VAT rate is not high compared with regional peers.

The decision for a VAT increase will likely depend on the political situation and the economy.

In the first eight months of the 2015 fiscal year, from October 2014 to May 2015, the Revenue Department collected a total of Bt1.02 trillion, about Bt114 billion or 10.1 per cent lower than its target and 4.5 per cent less than in the same period of last year.

"In May alone, tax revenue was Bt70 billion below target as petrochemical businesses and others paid their taxes in early June, instead of late May. In June, tax revenue is expected to be above target by tens of billions. In the first nine months [of this fiscal year], tax revenue is expected to be Bt80 billion below target," Prasong said.

In the first eight months, collection of corporate income tax was Bt46 billion below target, while VAT fell Bt34 billion short.

The lower-than-expected VAT revenue resulted from lower import values, which were below target by Bt37.7 billion, partly as a result of recent drops in crude-oil prices. VAT on domestic consumption was higher than expected by Bt2.9 billion.

Tax revenue from petroleum businesses was lower than projected, reflecting impacts on exploration companies from recent declines in crude-oil prices.

Prasong said the Revenue Department expected to miss its overall target of Bt1.965 trillion by no more than Bt160 billion in fiscal 2015. As a result, the department’s target for fiscal 2016 has been lowered to Bt1.895 trillion to reflect the real situation.

On the matter of 14 civil servants suspected of VAT fraud, Prasong said an investigation would be concluded before the end of this month, and appropriate disciplinary steps taken. After that, a committee will be established to investigate two more cases of suspected VAT fraud.