Finance ministry targets 2% growth, plans tax overhaul

Thailand’s Finance Ministry is aiming to steer the economy through heavier headwinds in 2026, targeting growth of around 2% while preparing a tax-structure overhaul for the next government, including a potential phased rise in value-added tax (VAT).

Lavaron Sangsnit, permanent secretary for finance, said the 2026 outlook faces multiple pressures, including the challenge of meeting state revenue targets, exchange-rate volatility with a risk of baht appreciation, and delays to the drafting of the FY2027 annual budget, which he said could slip by at least three months.

The Fiscal Policy Office (FPO) forecasts growth in a slower range of 1.5–2.5%, with a midpoint of 2.0% — a challenging but achievable level, he said. One key support at the start of the year, he added, could be election-related spending in the first quarter.

Lavaron said large sums are expected to circulate through both formal and informal channels during campaigning, helping keep the economy moving during the political transition.

On government formation, he said he expects the process to be faster than in past cycles because political alignments are clearer, although he acknowledged risks from unexpected events.

Still, he warned that a delayed FY2027 budget would not be positive for public disbursement and state investment, particularly later in the year.

Revenue target and exchange-rate risks

Lavaron said the government’s net revenue target for 2026 is set at 2.92 trillion baht, up 3.5%. However, it faces pressure from global economic assumptions and an exchange-rate projection of 34 baht per US dollar. If the currency fluctuates, he said, it could affect VAT collection on imports and revenues from various agencies, as well as increase costs and risks in managing public debt.

Fiscal space is tightening

He also cautioned about campaign policies being floated by political parties, such as cash handouts or debt write-offs that avoid credit bureau records, warning these may be difficult to implement and could exceed fiscal capacity given limited resources.

“The Finance Ministry’s job is to tell the government the truth about how much borrowing space remains,” he said, adding that without funding, such policies cannot be delivered — and forcing them through could create long-running problems. He said spending must be efficient, not simply focused on pumping money into the economy.

To reflect tightening fiscal space, he said the ministry will adhere strictly to the medium-term fiscal plan for FY2027–FY2030, with a goal of reducing the fiscal deficit to no more than 3.0% of GDP by 2029.

Preparing a revenue and tax reform plan

Lavaron said the ministry will raise revenue efficiency by deploying digital systems and Big Data to broaden the tax base and improve the accuracy of checks on individuals and businesses. It will also use the Finance Ministry’s Data Lake to link information across agencies, strengthening collection and supporting policy design, analysis and evaluation.

He said the ministry will review secondary laws and regulations linked to excise administration and relevant state enterprises, while using technology to improve tax collection management.

The ministry will also expand the tax base through proactive audits, covering informal operators and new businesses, and create incentives for those outside the tax system to enter it. Modern technology and integrated data from related agencies will be used to monitor, verify and assess the accuracy of tax payments.

Lavaron said the ministry is preparing a tax-structure reform plan for the next government, including VAT. The idea, he said, is that if the economy is strong enough, VAT could be raised gradually by 1.5 percentage points from 7% to 8.5%, with the longer-term aim of reaching 10% by 2030. Additional VAT revenue would be used to fund targeted welfare for vulnerable groups, such as cost-of-living relief and top-ups for the state welfare card.

He said any tax reform must be designed to fit current economic conditions, strengthen fiscal sustainability and fairness across income groups, and distribute the tax burden appropriately.

The plan would also include reviewing measures that reduce government revenue, keeping only what is necessary, while improving tax calculation methods, deductions and exemptions for certain categories.