The Revenue Department plans to double the ceiling for tax-deductible expenses for individuals to 120,000 baht effective next year for 2015 filing.
Director-general Suthichai Sangkhamanee said the higher planned deduction is meant to alleviate taxpayers' cost of living. The current maximum deduction is 40% of assessable income or 60,000 baht a year.
However, the increased tax deduction can only be claimed using tax receipts, which are not currently required and must be issued by small and medium-sized enterprises (SMEs) with annual sales of less than 30 million baht.
Interested SMEs can register to participate in the scheme at the Revenue Department.
The tax receipt requirement for the deduction will encourage individual taxpayers to request proof of purchases when they buy services and products from SMEs, preventing them from understating their tax payments.
The department expects the likelihood of higher sales for SMEs because individuals seeking to benefit from the deduction will force those SMEs into the tax system when they issue tax receipts.
Mr Suthichai said the personal income tax will likely be reduced further if the latest cut proves a success in creating a broader tax base and bringing in more tax revenue.
Those subject to the top tax bracket are the Revenue Department's main focus for increasing tax revenue, Mr Suthichai said.
Although the ceiling rate for personal income tax was slashed to 35% of assessable income from 37%, it remains the highest in Southeast Asia, said Mr Suthichai.
The maximum income tax rate in some countries stands at a mere 20%.
The latest tax cut, which extends income tax brackets to seven from five and narrows the range to 5-35% from 10-37%, takes effect in the 2013 tax year for 2014 filing.
The department predicts it will forgo 26 billion baht in tax revenue due to the tax cuts.
The middle class will likely be the greatest beneficiaries, with a tax bill cut of up to 40%-50%. High-income earners are expected to enjoy a 6% cut in income tax payments.