STIMULATING THE ECONOMY

The cabinet yesterday approved a new stimulus package of tax cuts worth about 40 billion baht in a further attempt to boost the economy.

The new package comes on top of a 115-billion-baht stimulus package passed by the cabinet a week ago to counter the economic slowdown in the face of the global recession.

Prime Minister Abhisit Vejjajiva said the new measures would further help ease the cost of living, help small and medium-sized businesses, and stimulate the property market.

The package includes a new personal income tax deduction on mortgage-loan principal payments of up to 300,000 baht per year. Under existing rules, only interest payments of up to 100,000 baht per year can be deducted from personal income tax. The property tax incentives will apply only to new homebuyers who make purchases this year.

Existing homebuyers will still be eligible for a tax deduction of 100,000 baht a year for mortgage interest payments, Finance Minister Korn Chatikavanij said.

The tax break in the property sector was expected to cost the government about 36.5 billion baht in lost revenue.

Mr Korn said the tax packages would give new buyers easier access to homes worth 1.5-2.5 million baht.

Small and medium-sized enterprises (SMEs) in all sectors earning less than one million baht will also be exempted from income taxes, up from 60,000 baht.

The tax allowance will benefit up to 970,000 SMEs, but will cost the government up to 1.4 billion baht in lost revenue.

The cabinet yesterday also approved a proposal to raise a tax allowance for community enterprises or community projects with an income of 1.8 million baht, a rise from 1.2 million baht.

Mr Korn said, as part of an attempt to boost the venture capital business, the government also agreed to exempt income tax on gains arising from share transfers of SMEs, and scrap initial capital requirements for the venture capital.

Exemptions on income tax, value-added tax, special business tax and stamp tax on income generated from asset transfers, asset disposals and other transactions stemming from debt restructuring were also given.

As a tourism stimulus package, the government will allow higher tax deductions for companies that pay for seminars or meetings.

Deputy government spokesman Puttipong Punnakan said the cabinet agreed to waive visa fees for three months, cut the landing fee by 20% for regular flights and up to 50% for chartered flights, and waive property tax for hotel operators.

An exemption on entrance fees for national parks was allowed in a bid to revive its key tourism industry, which was battered by recent political turmoil.

The current Democrat-led government, in office just over a month, has extended other measures brought in by the past administration, such as free water and electricity for the poor and subsidised public transport. However, it removed subsidies on retail petrol prices now crude oil prices have fallen.