Finance Ministry plans to overhaul income tax deductions to boost revenue efficiency

Deputy Prime Minister and Finance Minister Ekniti Nitithanprapas said his ministry is studying revisions to the personal income tax deduction system, which is currently scattered and lacks a clear framework. 

The government may introduce a ceiling for total allowable deductions to create transparency and ensure taxpayers do not exceed reasonable limits each year.

The reform is part of efforts to strengthen fiscal discipline and boost government revenue. Officials expect the restructuring to expand Thailand’s tax base significantly once digital systems are fully implemented for tax collection. A clear operational framework is expected by November.

Finance permanent secretary Lavaron Sangsnit said the tax reform drive presents an opportunity to modernise the revenue system. The goal is to finalise reform guidelines within this year.

Lavaron noted that current deductions have reduced personal income tax revenue below potential levels. If deduction criteria are revised, the government could collect more taxes.

Currently, taxpayers who claim all available deductions can deduct over 1 million baht per person. 

High-value deductions include contributions to Retirement Mutual Funds (RMF) of up to 500,000 baht and Super Savings Funds (SSF) of up to 300,000 baht, as well as life insurance, parental care, and personal allowances. These deductions have contributed to lower income tax collection than expected.

Lavaron said the reform might not apply to income earned in 2025, which will be filed in 2026, as some legal amendments are required. However, the new system could be implemented for income earned in 2026, to be filed in 2027.

He added that once the “Quick Big Win” policies stabilise, the ministry will move forward decisively. Still, any revision to deductions must be considered carefully since tax relief is often used as a policy tool to encourage desirable behaviour among citizens.

For fiscal year 2026, the Finance Ministry has not set a higher revenue target than in 2025, believing current targets remain achievable even though GDP growth is expected to slow.

Revenue performance in fiscal 2025

The Finance Ministry reported that the Revenue Department collected 2.33 trillion baht in fiscal year 2025 (October 2024–September 2025), up 67.1 billion baht or 3% year-on-year, though still 37.2 billion baht (1.6%) below the budget target.

Of this, direct collections by the department totalled 1.87 trillion baht, a 4.9% rise from the previous year and nearly on par with the budget target—just 636 million baht short.

The main driver was value-added tax (VAT) from domestic consumption, which reached 992.82 billion baht, exceeding the target by 23.82 billion baht or 2.5%. Sectors contributing to the increase included retail and wholesale trade, financial services, electricity and gas, and telecommunications.

Import and property taxes drag overall revenue

Revenue collected by other agencies on behalf of the Revenue Department totalled 461.89 billion baht, down 4.2% year-on-year and 7.3% below the target.

The shortfall was mainly due to declining VAT on imports, which dropped to 376.2 billion baht—29.79 billion baht or 7.3% below target—because of the stronger baht and lower global oil prices.

Property-related taxes collected by the Land Department also fell short, as demand for housing weakened and banks remained cautious about extending mortgage loans despite state stimulus measures.

Key taxes that underperformed included:

• Corporate income tax: 797.1 billion baht, down 4.7% from the target.
• Petroleum income tax: 27.41 billion baht, down 19% year-on-year and 29% below target.
• Specific business tax: 66.87 billion baht, down 3.6% from last year and 8.8% below target.
• Personal income tax: 432.35 billion baht, 0.8% below target.