The Finance Ministry is considering scrapping the tax exemption on interest of not more than 20,000 baht a year, which it found has not served its purpose.
Currently, interest incomes from all types of bank deposits are subjected to a 15% withholding tax. However, the levy is waived if the total interest income a depositor receives from all banks is not more than 20,000 baht a year to promote savings among people.
Banks are responsible for deducting the tax if the interest a person gets is 20,000 baht or more. If he has accounts with other banks, it is his responsibility to inform the bank so that it can deduct the withholding tax.
If the withholding tax is not deducted, he may also choose to declare the interest as an income when he files his tax form, in which case the personal income tax rate of his income bracket applies.
Minister Apisak Tantivorawong, a former banker, said on Friday the waiver became a loophole exploited by well-to-do people to evade taxes legitimately with the help of bank staff.
“It’s become a common practice for bank employees to advise a large depositor to close his bank account when the interest nears 20,000 baht and move the money to other financial products. This is not consistent with the intent of the law,” he said.
The minister said he had instructed the Revenue Department to study how to plug the loophole.
An initial proposal was to scrap the waiver so that banks will have to deduct the withholding tax on all interest regardless of the amount. A depositor can then file for a tax rebate in the following year if the interest he has received in the previous year is not more than 20,000 baht.
Another proposal is to ask the Bank of Thailand to step up supervision on banks to stop the practice and punish wrongdoers.