Doubling tax deduction on agenda
The Revenue Department is mulling doubling individual income-tax deduction to Bt120,000, while scrapping deductions for investments in long-term equity fund (LTF) and retirement mutual fund (RMF).
“The existing deduction limit has been in place for a long time, against a drastic change in the economic structure. Taxpayers, particularly salaried people, have to endure higher expenses. This should be increased to reduce their tax burden,” said Revenue Department director-general Suthichai Sangkamanee.
Under the Revenue Code, deduction must not exceed 40 per cent or no more than Bt60,000 of their combined salary, bonus and related income. According to Suthichai, while the 40-per-cent threshold will be maintained, the value could be raised to Bt120,000. To be eligible for the extra Bt60,000 deduction, taxpayers will have to present tax receipts issued upon their goods purchases.
“This will relieve their tax burden and also help the department monitor business tax payments. This will force taxpayers to ask for tax receipts from shops,” he said. He added that deductions for investment in LTF and RMF, which could be worth over Bt300,000 per annum, may be abolished.
While this is to ensure fairness to taxpayers, it comes at a time when the Thai economy is slowing down partly due to weak consumption. High household debt, accumulated in the past years thanks to stimulus policies, is being blamed for the slowing consumption.
According to the Fiscal Policy Office, in the second quarter household debt at Bt9.28 trillion was at 79.2 per cent of gross domestic product (GDP). The value rose 15.7 per cent from the same period last year and 3.3 per cent from the previous quarter. Of the total, debt owned by commercial banks amounted to Bt3.9 trillion, while the rest was by state-owned banks and others. In the quarter, credit card, leasing and consumer loans expanded by 36 per cent.
Standard and Poor’s Ratings Services warned in a recent report that Malaysia and Thailand are the most vulnerable to shocks, given their level of household debt at 79-80 per cent of GDP. The rating agency reckoned that it was high household debt that had triggered the financial crisis in the US in 2008.
Somchai Sajjapongse, director-general of the Fiscal Policy Office, said last week that household debt is being stabilised following the ending of some stimulus measures, which had encouraged debt building. He said household debt had not led to instability in the financial system and should not lead to an economic crisis. Only Bt63 billion of consumer loans have turned bad, accounting for only 0.53 per cent of outstanding loans.
“The debt rose mainly due to stimulus measures. But at one point, when the measures are ended, the level would return to a normal level,” he said.
