Low earners will see their income tax cut by 50% under the new structure, said Revenue Department director-general Satit Rungkasiri.
Top-rate payers will see a 20% reduction in tax.
Under the new system, workers now taxed at 30% will see their burden fall to a range of 25-30%, those taxed at 20% will fall to a range of 15-20% and those taxed at 10% will drop to 5%.
Consequently, people on the lowest incomes will see their annual tax payment reduced by 50%, the middle range will enjoy a 30% cut and top-rate payers will pay 20% less tax.
Personal income will be subject to progressive tax rates by increasing the number of tax brackets from five to seven.
Taxable income up to 300,000 baht will be taxed at 5%, down from 10%, while the first 150,000 baht will still be exempt from taxation.
Those earning 300,001 to 500,000 baht bracket will be taxed at 10%, while those earning 500,001 to 750,000 baht will pay 15%, cut from 20% now, and those earning 750,001 to 1 million baht bracket will have an unchanged rate of 20%.
People earning 1,000,001 to 2 million baht will pay 25% tax, down from 30%, while those earning 2,000,001 to 4 million baht will pay 30% and those earning more than 4 million baht will be taxed at 35%, down from 37%.
The new brackets will be effective for individual income earned from 2013.
Meanwhile, corporate income tax will be cut to 20% from 23% in the second half of next year.
The new corporate income tax rate will be the second-lowest rate in the Asia-Pacific and Oceania regions. Hong Kong has the lowest at 17%.
Thailand's value added tax at 7% is also near the bottom of the world's tax table. Only Japan and Taiwan have lower rates, while Japan is considering increasing its rate to 7%.