The Finance Ministry has brushed aside a National Legislative Assembly (NLA) proposal to raise the value-added tax (VAT) by one percentage point, saying a hike would be inappropriate in the current economic climate.
Permanent secretary for finance Somchai Sujjapongse said that even though the current VAT rate of 7% appears to be among the lowest in the world, an increase could stall growing economic momentum.
Moreover, the e-tax system aimed at stemming tax evasion could raise tax collection by at least 100 billion baht a year when it is fully adopted, making it unnecessary for the government to raise the VAT rate, Mr Somchai said.
The NLA recently floated the idea of increasing the VAT by one percentage point from 7%, which would boost government revenue by up to 70 billion baht a year.
The VAT was introduced in Thailand in 1992 at a rate of 10% but was immediately slashed to 7% after business operators said the high rate cut into purchasing power. It has stood at that rate since.
Finance Minister Apisak Tantivorawong said the ministry would seek cabinet approval to keep the 7% rate for another year when the extension expires on Sept 30.
His comment underscored the Finance Ministry's desire not to raise the VAT in the coming year.
Meanwhile, Mr Somchai said the Finance Ministry is considering the introduction of a land windfall tax, which would be imposed on the inflated value of land from infrastructure projects, as well as a withholding tax on gains from investment in fixed-income funds.
The Finance Ministry aims to complete drafting a bill for the so-called betterment tax this year. This tax would only be imposed as a one-time payment when land ownership is transferred. That means other landlords on a plot for which the tax has already been paid would not be subject to it.
The betterment tax could increase asset-based taxes and diversify the government's revenue structure, of which more than 90% now comes from income and consumption taxes, helping narrow social inequality.
Mr Somchai said that whether the withholding tax for fixed-income funds will be charged at the same rate as interest earned from deposits (15%) will depend on the Fiscal Policy Office.