Private sector urged to take advantage of investment tax incentive in second half
THE FINANCE MINISTRY yesterday urged the private sector to begin making serious investments in the second half before the double tax deduction for expenses is discontinued by year-end.
The ministry has amended the conditions for the double deduction, allowing projects that might not be completed this year to get the incentives, in order to ease worries over project construction periods and encourage the private sector to inject money into the economy, said Somchai Sujjapongse, Finance Ministry permanent secretary.
Speaking at a “Krungsri Business Forum”, Somchai said the government had attempted to drive gross domestic product through fiscal policy for the past six months, including investment in small projects, would attract private investment to follow suit. However, so far, that has not happened as much as the government expected.
The government will be kicking off mega-projects in the second half of this year, so the private sector should speed up their investment if they want to get tax incentives, especially the double deduction for expenses.
“They have no need to complete their projects this year but they must start them before the double deduction ends this year,” he told the forum, mostly attended by entrepreneurs.
GDP in the first quarter expanded by 3.2 per cent year on year thanks to the short-term measures of the government, he said, but this was only quantitative growth. Thailand should shift from quantitative to quality growth, starting from the second quarter.
He said the current policy interest rate and the flexible inflation-targeting framework helped ease worries for the government in preparing to implement such quality growth.
But to shift to the quality growth, the country needs help from private investment, he stressed.
“That is why we are going to ‘Thailand 4.0’ and selecting 10 key industries, because the government wants the country to exit from the middle-income trap by 2032,” he said.
By that year, monthly income per head should be Bt40,000 and low-income earners should earn at least Bt15,000 a month, while the Corruption Perceptions Index ranking should be in the top 10 and the Global Competitiveness Index score in the top 15, he said.
Dr Veerathai Santipraphob, governor of the Bank of Thailand, told the forum that the central bank was still embracing the flexible inflation-targeting framework to support the country’s growth.
Even though inflation is turning positive, he believes flexible targeting is the suitable tool right now to tackle market volatility. The BOT has other tools to tackle foreign-exchange volatility if the financial markets become more volatile from the expected US interest-rate increase, he said.
To support private investment, the BOT has embraced the second phase of capital-account liberalisation, he said.
Luxmon Attapich, Thailand senior economist at the Asian Development Bank, told the forum that the clear signal of government investment would bring in private investment, making the outlook for Thai economic growth in the second half better than in the first half.
The ADB has forecast Thai GDP growth this year of 3 per cent and 3.5 per cent next year. However, both are below the country’s potential of 4.5-per-cent growth.
The country’s failure to reach its growth potential is due to weak human-resource productivity, she said.
