The military-appointed interim government's policy of helping the underprivileged and farmers in sustainable ways will cost an estimated 100 billion baht a year, says Finance Minister Sommai Phasee.
Providing assistance to low-income earners will be done through a negative income tax — a system in which people earning below a certain amount would receive a subsidy from the government instead of paying taxes — while farmers will benefit from cost-cutting measures and improvements in grain quality.
Both measures are expected to come into force by fiscal 2015 starting this Oct 1.
Sommai: Grace period for land tax
The Finance Ministry recently said a negative income tax could solve the "right problem" while costing less than current populist policies.
The rice-pledging scheme is the latest and the most egregious example of populism, Mr Sommai said.
The scheme, designed by the Yingluck Shinawatra government to buy grain at 40-50% above the market price, left the government with a hefty debt of 700 billion baht, while it is expected to cost taxpayers 400 billion from running the scheme for five crops.
Moreover, the price of rice after the costly scheme was terminated has sunk sharply due to concerns over the release of millions of tonnes of milled rice hoarded in warehouses.
Mr Sommai said an inheritance tax would be levied ahead of a land and building tax.
It is not worthwhile for the affluent to avoid paying inheritance or gift tax, as heirs are subject to a mere 10% tax of assets worth more than 50 million baht passed from donors.
The government will offer a grace period before taxing land and buildings to allow people to prepare while giving relevant state agencies sufficient time to lay out the reference price, Mr Sommai said, without elaborating on the length of the grace period.
A Fiscal Policy Office study showed implementation of the negative income tax would cost the government 56 billion baht, while 18.5 million people or 26.4% of the population would benefit.
Under the scheme, the government would pay 20% of the annual income to those earning 30,000 baht or less a year. For those making 30,001 to 80,000 baht a year, the scheme would transfer cash at a declining rate of 12%.
The scheme is expected to help 1.6 million people cross the poverty line, set at 2,492 baht a month in 2012.
Meanwhile, the Public Debt Management Office (PDMO) is formulating a plan on a potential rescheduling of a 700-billion-baht debt repayment period for the rice-pledging scheme to 30 years from five years through the launch of long-term and savings bonds.
The move is in response to Deputy Prime Minister MR Pridiyathorn Devakula's policy of widening investment alternatives to retail investors and let them benefit from holding 30-year savings bonds.
The longest-term savings bond issued by the PDMO has a 10-year tenure.