The Finance Ministry has suggested that the Board of Investment (BoI) grant investment privileges on a project basis instead of its current practice of approving one privilege for several projects for a single company.
Deputy permanent secretary Prapas Kong-ied said the legal dispute between the government agency with Japanese electronic component and parts manufacturer NMB-Minebea Thai Ltd on investment tax incentives should prompt the BoI to reconsider its strategy.
The problem arose due mainly to the net-off issue for foreign investment companies, which are generally granted tax breaks under the BoI's investment incentives for many projects.
Under BoI rules, a company can file tax in accordance with the privilege given by the BoI, but the Revenue Department insists the company makes a net-off calculation first in accordance with the Revenue Act.
Minebea brought the issue to court after it was requested by the Revenue Department to make a net-off calculation on each project basis, which meant the company could not use retained loss from one project to decrease the income tax payable on another project.
The Supreme Court on May 16 this year ruled in favour of the department in the dispute dating back to 2008 and involving 502 million baht in taxes.
The dispute has negatively affected the government, said Mr Prapas. "The tax issue is sensitive even though the Supreme Court ruled that we did right and the private company was wrong. They still have hard feelings," he said.
"Also, Minebea has yet to pay the tax. By law, the Revenue Department cannot file another lawsuit asking Minebea to pay this tax because the department was the defendant and technically the defendant cannot file a similar lawsuit against plaintiffs for the same case. We have to solve this problem."
Mr Prapas said that if the BoI gave privileges separately to each project, it would also prevent some companies from exploiting a loophole by moving assets between projects in order to avoid paying tax.
BoI secretary-general Hirunya Suchinai said the Finance Ministry's suggestion to encourage the BoI to grant investment promotions on a project basis is practical.
However, the BoI believes that a private company should set up a new company for each project before applying for privileges.
Mrs Hirunya said the BoI had already planned to resolve this issue but she was not in a position to disclose details.
"It's a good idea that can be done immediately. A company that wants another investment promotion from the BoI can set up a new company to ask for the promotion. Then the BoI will consider it on a case-by-case basis as usual. We don't need to amend any regulations to do so. It can be done immediately," she said.