Year-end tax incentive helps boost Bt11-bn spending: UTCC
The government’s tax incentive for year-end shopping could have helped stimulate spending during the New Year festive season by another Bt10.99 billion, adding up to a combined spending of Bt139.97 billion, compared to the earlier projection of Bt125 bill
This tax deduction measure could have spurred year-end spending to Bt17.58 billion, driving up the Kingdom’s economic growth by 0.1 percentage point, which will help ensure that gross domestic product last year grew by nearly 3 per cent, said Thanavath Phonvichai, director to the UTCC’s Economic and Business Forecasting Centre.
He said the stimulus provided by this measure more than made up for the lost tax revenue, estimated at about Bt3.18 billion.
Of 9.7 million Thais who earn enough to pay income tax, 1.39 million would have spent more due to the tax incentive, which would have helped drive domestic economic growth.
Thanavath said that given the success of the year-end tax incentive, the government could consider similar measures to spur the economy this year, since many risk factors could still hamper the country’s growth.
For this year, the UTCC projects GDP to grow by 3.5-4 per cent, mainly driven by government and private investment projects. However, there are many risks including international conflicts and terrorism, China’s slowing growth, drought, and further slide in the prices of oil and crops.
Drought is predicted to cause about Bt30 billion in losses for the farming sector this year. The government should launch measures to boost farmers’ incomes as soon as possible, he suggested.
Meanwhile, the UTCC’s survey found that the Consumer Confidence Index had risen in December for the third consecutive month, to 76.1 points from 74.6 in November. That was the highest figure in seven months, though still below the 100-point threshold and therefore in negative territory.
Despite that, Thanavath said consumers were in more of a mood to spend on a new home, cars, travel, and starting new businesses, thanks to the government’s economic stimulus packages and confidence in future growth.
Other confidence indices were also less negative about the economy’s growth potential. Confidence in future employment opportunities rose from 69.6 points in November to 70.9 points last month, while confidence in future income improved from 90.8 to 92.4 points.
Positive factors included the year-end tax incentive, the Bank of Thailand’s slightly higher estimate of 2015 economic growth (2.8 per cent, up from 2.7 per cent), and lower fuel prices, including diesel retailing for Bt20.59 per litre.
However, some negative factors continued to hit consumer sentiment. They included low crop prices, a declining stock market, export contraction, and concerns over international conflicts.
