First-home scheme altered to help poor The government plans a review of the tax system, including possible cuts in personal tax deductions and tax privileges for corporate investors.
Finance Minister Thirachai Phuvanatnaranubala yesterday said tax reform is critical for helping the economy to remain competitive.
Reform would cover corporate,individual and consumption taxes.
The Yingluck Shinawatra government says it will slash the corporate tax rate, now at 30%, to 23% next year and to 20% by 2013.
The government has also approved temporary cuts in excise taxes on fuel and a plan to offer tax rebates for firsttime buyers of new cars and homes.
Thailand’s corporate tax rate is considered relatively high, with only the Philippines charging a similar rate within Asean. Malaysia,Indonesia and Vietnam charge a 25% rate, while Singapore charges 17%.
For personal taxes, only 9 million people file an annual tax return, representing less than one-third of the labour force. Just 2.5 million actually pay income tax after deductions, and only 18,000 people are estimated to pay tax at the 37%maximum rate.
Mr Thirachai said the ministry would review tax incentives offered by the Board of Investment (BoI).
“Many other countries offer fewer incentives to encourage investment and limit benefits only to industries deemed critical or beneficial to their economy,” he said.
The BoI offers investors benefits such as special corporate tax rates, waivers or deductions on duties for imported materials and special deductions on utility expenses.
Mr Thirachai said deductions for personal income taxes, such as deductions on insurance premiums or investment in long-term equity funds, would also be reviewed and possibly cut.
Consumption-based taxes may also rise. Mr Thirachai noted that for cars,an excise tax is paid only upon the purchase of a car.
“But many countries collect taxes on an annual basis, with higher charges imposed for more expensive luxury cars,” he said.
“Another proposal under study is whether we should collect taxes not from investors, but from the Stock Exchange of Thailand itself,” he said.Capital gains taxes on stock investments are not currently subject to personal income tax.
Korn Chatikavanij, a former finance minister and deputy leader of the opposition Democrats, said the gov-ernment should rethink its priorities.”So far, we have seen this government push spending initiatives but also cut tax rates. We shouldn’t be depending on debt to finance spending,” he said.
Mr Korn said he was surprised the government decided against pushing forward a land ad building tax, a bill that represented a key instrument for reform of the tax system.
The bill, written by the Abhisit Vejjajiva government, imposes an annual tax on buildings and land, including penalty taxes on landholdings left undeveloped.
The current government must reaffirm the bill this week in parliament or it will be automatically rejected.
Mr Korn said the draft law is a major step towards increasing social equality.Some 90% of tax revenues came from income, with little collected from assets,a structure which he said benefited the wealthy.
Pattamawadee Suzuki, dean of the faculty of economics at Thammasat University,agreed the government should pass the land ad building tax.
faculty of economics at Thammasat University,agreed the government should pass the land ad building tax.She said the government should consider other taxes as well, such as an environmental tax, to help improve resource use within the country.
She said the government should consider other taxes as well, such as an environmental tax, to help improve resource use within the country.
Boonsong Teriyapirom, a deputy finance minister, said tax credits could be used for up to four years from the date of transfer of the home.
From now until the end of 2012,new homebuyers may claim a tax credit of up to 10% of the purchase price of a new home or condo priced up to 5 million baht for a period of up to five years. The tax credit, limited to 100,000 baht per year, will offset annual tax liability under the programme.
Mr Boonsong said low-income buyers with no tax liability may choose to delay the use of the deductions under the programme for up to four years after the purchase of the property.Under current tax rates, workers earning less than 20,000 baht per month are exempted from income tax.
He said the ministry is also considering a programme offering 0% interest for home mortgages on properties worth up to one million baht to help low-income residents.
Property experts welcomed the clarifications to the programme.
Issara Boonyoung, president of Housing Business Association, said the new rules simplified the tax calculation process and helped buyers by structuring the benefits as a tax credit rather than a deduction o taxable income.
Wason Khongchantr, managing director of Modern Property Consultants,noted that most first-time home buyers typically aimed at units priced below 3 million baht.
Source: Bangkok Post