Govt mulls first tax on stock trading in 30 years to cut budget gap

Govt mulls first tax on stock trading in 30 years to cut budget gap

The Stock Exchange of Thailand in May 1975. The government is mulling the first tax on stock trading for more than three decades. (Bangkok Post file photo)
The Stock Exchange of Thailand in May 1975. The government is mulling the first tax on stock trading for more than three decades. (Bangkok Post file photo)

The government is considering taxing stock trading for the first time in more than three decades, along with making crypto traders part with a share of their profits, as the government hunts for revenue to fund billions of dollars in pandemic relief.

Prime Minister Prayut Chan-o-cha’s administration is expected to decide by end-January on the method and rate of taxing stock trading, as well as details on how to tax gains from trading digital assets including cryptocurrencies, according to Finance Minister Arkhom Termpittayapaisith. 

The government is seeking new sources of revenue to finance Covid stimulus measures and cut reliance on borrowing as Southeast Asia’s second-largest economy continues to reel from the pandemic. 

Trading of stocks and digital assets has surged during the pandemic as investors chase higher returns amid record-low interest rates, opening up new tax avenues for the government. 

“Due to the Covid-19 outbreak, general government revenue has been diverging from spending since 2020, and the impact appears to be permanent,” said Charnon Boonnuch, an economist at Nomura Holdings Inc in Singapore. 

“This suggests that the government will likely look to expand its revenue sources further and beyond the proposed tax on digital assets and the recent e-commerce tax, to accommodate an upward shift in spending and provide a scope for more fiscal support to the still-weak economic outlook if needed.”

Thailand’s tax revenue is lower than most other developing economies, limiting the government’s ability to boost spending to counter the economic slowdown. The country’s tax-to-GDP ratio was at 16.1% in 2019, compared to 18.4% for upper-middle income nations and 24.2% for high-income nations, said Athiphat Muthitacharoen, an associate professor at Chulalongkorn University and the author of “Strengthening Thailand’s Tax System.”

Tax Breaks

While many countries, including Indonesia, have raised their value-added tax in recent years to expand the revenue base and rein in budget deficits, the government cut the VAT rate to 7% from 10% in 1999 and has maintained it at that level ever since. The country also offers many tax rebates to lure investment and help businesses.

The finance minister has called for steps to broaden the tax base, but the prime minister has cautioned against levies that will discourage the adoption of innovative financial technology. The move to tax stocks and cryptocurrencies already has been opposed by the industry. 

The revenue department is expediting discussions on the proposed crypto tax, and its decision will be fair to investors and other stakeholders, Director-General Ekniti Nitithanprapas said in a statement on Jan 10.

Net revenue collection fell short of its target by 11.5% in the fiscal year ended September because of weakened economic activities and fiscal measures extended to Covid-hit businesses and people, official data showed. The overall fiscal deficit is seen narrowing to 6.5% of GDP in the current fiscal year from 9.9% a year earlier, according to Nomura.

“Thailand hasn’t made any major moves on tax collection for decades and it will be difficult to raise any taxes ahead of the general elections,” Mr Athiphat said. “Tax will become one of the key problems over the next five years.”  

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