VAT increase, flat income tax rate will only burden poor: UNTP MP

A coalition MP voiced opposition on Thursday to the ruling Pheu Thai Party’s proposal to raise value-added tax (VAT) and implement a flat income tax rate, arguing that these measures would impact the low-income sector.

Thanakorn Wangboonkongchana, a United Thai Nation Party list MP, said the tax reform plan proposed by Finance Minister Pichai Chunhavajira is worrisome. The proposal includes raising VAT and introducing the same flat rate for corporate and personal income tax.

On Wednesday, Pichai said the current 7% VAT rate, unchanged since 1992, needs to be increased to generate more revenue for state welfare programmes. However, he did not specify the proposed increase, though he pointed out that other countries collect VAT rates ranging from 15% to 25%.

Thanakorn said he has learned that the Finance Ministry is considering a tax reform plan that would implement a uniform 15% rate for corporate income tax, personal income tax and VAT. While acknowledging the rationale behind lowering corporate income tax to attract foreign investment, he warned that increasing VAT and personal income tax to compensate for this would burden low-income people who are already struggling to make ends meet.

The MP said that though increasing VAT would boost the government’s revenue by a lot, it will also increase the cost of living and make life difficult for low-income individuals who spend most of their income on essentials.

Furthermore, he cautioned that such an increase would reduce consumers’ purchasing power, slow down domestic consumption and ultimately harm economic growth.

With Thailand’s economy still recovering and many people suffering from low incomes and high debts, Thanakorn urged the government to reconsider increasing VAT at this time.

He added that if the Finance Ministry insists on a 15% VAT, it must introduce measures to protect vulnerable groups, such as exempting basic goods and services from VAT and providing subsidies to those in need.

He also recommended a gradual increase in the VAT rate rather than a sudden jump from 7% to 15%. He proposed that before increasing VAT, the government should raise the minimum wage and reduce the costs of oil, electricity and public transport.

As for setting a flat 15% income tax rate, Thanakorn argued that it would favour the wealthy and burden the poor. He pointed out that while low-income earners currently pay lower taxes, the flat rate would require them to pay more, which he said is unfair. He suggested that if a flat was implemented, then the government should allow low-income earners to deduct more expenses from their taxable income.

Finally, Thanakorn proposed that the government should introduce inheritance and wealth taxes before pursuing a flat rate to address the widening wealth gap.