Finance secretary rejects proposed VAT hike

Finance permanent secretary Somchai Sujjapongse

Finance permanent secretary Somchai Sujjapongse has rejected the National Legislative Assembly’s (NLA) proposal for a 1% increase in the value-added tax (VAT), saying it does not suit the present economic circumstances.

A VAT rise was within the ministry’s purview, but any such decision would depend on the country’s economic situation and the state’s financial position, he said.

An increase would not be suitable at this time as the country had recently begun showing signs of economic recovery, with growth increasing by 3.3% during the first quarter of this year.

Although the 7% VAT was the world’s lowest rate, an increase could result in the economy stumbling.

The ministry was also developing e-tax invoicing, an online system expected to bring an extra 100 billion baht or more into the state coffers each year and help plug a loophole in revenue collection, he said.

The NLA on Thursday proposed that VAT be raised by 1% and the additional revenue be reserved for education and health care. It would put another 60-70 billion into state coffers each year. 

The VAT rate was set at 10% but the effective rate has been 7% since 1997. Each government issues an announcement each year keeping the 7% rate for political or economic reasons. The current rate is due for review in September, which means the ministry must propose a rate to the cabinet soon.

Revenue collection has failed to meet targets since 2013 after Thailand cut tariffs in line with obligations under the World Trade Organization and free trade agreements, the NLA report said. 

Therefore, the panel proposed measures to boost revenue.

Mr Somchai also said the ministry is looking at a windfall tax on profits from state projects, which flow to the private sector, as a means to increase revenue.

Tax would also be collected from bond funds, which are currently exempt, he added.

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Finance secretary rejects proposed VAT hike

Finance permanent secretary Somchai Sujjapongse

Finance permanent secretary Somchai Sujjapongse has rejected the National Legislative Assembly’s (NLA) proposal for a 1% increase in the value-added tax (VAT), saying it does not suit the present economic circumstances.

A VAT rise was within the ministry’s purview, but any such decision would depend on the country’s economic situation and the state’s financial position, he said.

An increase would not be suitable at this time as the country had recently begun showing signs of economic recovery, with growth increasing by 3.3% during the first quarter of this year.

Although the 7% VAT was the world’s lowest rate, an increase could result in the economy stumbling.

The ministry was also developing e-tax invoicing, an online system expected to bring an extra 100 billion baht or more into the state coffers each year and help plug a loophole in revenue collection, he said.

The NLA on Thursday proposed that VAT be raised by 1% and the additional revenue be reserved for education and health care. It would put another 60-70 billion into state coffers each year. 

The VAT rate was set at 10% but the effective rate has been 7% since 1997. Each government issues an announcement each year keeping the 7% rate for political or economic reasons. The current rate is due for review in September, which means the ministry must propose a rate to the cabinet soon.

Revenue collection has failed to meet targets since 2013 after Thailand cut tariffs in line with obligations under the World Trade Organization and free trade agreements, the NLA report said. 

Therefore, the panel proposed measures to boost revenue.

Mr Somchai also said the ministry is looking at a windfall tax on profits from state projects, which flow to the private sector, as a means to increase revenue.

Tax would also be collected from bond funds, which are currently exempt, he added.

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