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ECONOMY
WICHIT CHANTANUSORNSIRI
The Finance Ministry rebuffed calls yesterday from the private sector to cut corporate tax rates. Finance Minister Surapong Suebwonglee said authorities had little confidence that a rate cut would facilitate new investment and economic growth.
At the same time, a rate cut would have significant implications for the country's fiscal budget _ corporate tax revenues represent the second-largest source of income for the government after value-added tax.
Dr Surapong told business leaders that the ministry had considered revising the country's tax system, including current corporate tax rates.
''However, we must be certain that the rates and the timing are suitable,'' he said at a conference hosted by the Joint Standing Committee on Commerce, Industry and Banking.
Pramon Sutivong, the chairman of the Board of Trade, said at the event that Thailand's corporate tax rate of 30% placed local firms at a competitive disadvantage compared with other companies in the region. Malaysia charges a corporate tax of 26%, Hong Kong 15% and Singapore 18%.
''This is the wrong time to consider a cut in corporate or personal income taxes. The ministry will do so only once it is confident that the economy is supportive of such measures, and that [cutting taxes] will support investment and economic growth,'' Dr Surapong said.
He told business leaders that the government in the second half of the year would focus more on medium- and long-term development policies.
Thailand must do more to support and leverage its competitive advantages in sectors such as tourism, agriculture and health care, Dr Surapong said.
''The aim is to raise Thailand's position from a low-income country to a middle-income one,'' he said.
Inflation reached a 10-year high of 8.9% in June on higher oil and food prices. But policymakers insist that economic growth remains on track at around 5.5%, which would make Thailand one of the few countries in the world expected to post stronger growth this year than in 2007. Growth last year was 4.8%.
Despite inflation, the country's fiscal position and exports remain strong, said Dr Surapong.
The Finance Ministry has asked state-owned banks to maintain current interest rates to avoid overburdening borrowers.
Dr Surapong insisted that the measure was not a compulsory one, but rather a call for state banks to assist the public. The ability of each bank to maintain current rates would depend on their funding position.
Economists expect the Bank of Thailand will raise short-term interest rates when the Monetary Policy Committee next meets on July 16, particularly as core inflation, which excludes food and energy prices, rose to 3.6% last month, or over the central bank's inflation target.
But business leaders say an interest rate increase would only add to the burden of local companies and consumers already suffering from rising inflation.
A rate hike would raise production costs for businesses and could lead to higher non-performing loans for local banks as companies faced greater difficulty in servicing debt, said Santi Vilassakdanont, the chairman of the Federation of Thai Industries.
Mr Pramon of the Board of Trade said that if rates rose, authorities should consider additional ways to help small businesses, such as subsidised loans.
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