The government's falling revenue is becoming a stumbling block for a new administration to implement economic stimulus focusing on tax incentives, says the Finance Ministry's senior official.
Rangsan: Stimulus options limited
Finance permanent secretary Rangsan Sriworasart instructed the Fiscal Policy Office (FPO) to map out an economic stimulus package that will focus on management rather than tax privileges. It is to be launched as soon as the new government is set up to revitalise the faltering economy, he said.
Mr Rangsan said restrictions in implementing stimulus measures that focus on tax incentives are increasing as the Finance Ministry's revenue collection has declined following the recent corporate and personal income tax cuts.
For the first five months of this fiscal year, the government's revenue collection fell 0.6% short of its target, and was 3% lower than the same period last year. Tax revenue collected by the Revenue Department, the Excise Department and the Customs Department missed its target by 4.6%, and dropped 2.5% over the same period a year earlier.
The fiscal year runs from Oct 1 to Sept 30.
The Yingluck Shinawatra administration slashed the corporate tax to 20% from 30% previously, as promised during the 2011 general election. The government also overhauled the personal income tax structure by expanding the tax brackets to seven from five and cutting the lowest rate to 5% from 10% and the highest to 35% from 37%.
"The decline in revenue collection was initially attributable to cuts in corporate and personal income tax. Revenue from value-added tax (VAT) on domestic consumption remains normal, indicating that consumption is still resilient," he said.
VAT collection fell 2.4% short of its target in February due mainly to lower than expected collection from VAT on imported goods. VAT collection on domestic consumer products in February exceeded its target by 2.2%, but plunged substantially from previous double-digit growth.
Months of political upheaval has frayed nerves amid worries the country's economic doldrums will deepen and the government's revenue collection will be adversely affected, he said.
Mr Rangsan said he instructed the Finance Ministry's tax collectors to stem loopholes used for tax avoidance and raise the efficiency in collecting tax.
However, he insisted the ministry has no plan to raise the VAT rate to 10% when the current levy's term of 7% on all purchases expires in September.
In a related development, Mr Rangsan said the potential delay in a 2015 budget following the political impasse has compelled the Finance Ministry's FPO to cut its 2014 growth forecast to 2.6% from 3.1% earlier. The revised figure is based on the assumption a new government will be in effect somewhere from July to September, resulting in a six-month postponement in 2015 budget implementation.