The Finance Ministry's permanent secretary Krisada Chinavicharana is warning the new government that tax reforms to increase revenue must not cause a shock to the economy.
"Tax revenue is only 14% of GDP, though it should be 15% or 16%. In all past government administrations, the ministry proposed tax reform plans for consideration, consisting of 20 items," he said.
Mr Krisada said that although the ministry wants to implement tax reforms to increase revenue in order to cover expenses and deal with future economic uncertainties, the measures must not cause a shock to the economy.
"Anything that is too extreme can shock the economy. For example, tax-deductible expenses need to be reduced on a step-by-step basis," said Mr Krisada.
He said the Revenue Department has many current tax deductions, such as retirement mutual funds, life insurance premiums, and interest on mortgage. In total, these represent a high amount of tax deductions, said Mr Krisada.
One approach to prevent excessive tax deductions would be to put a cap on the total deductible amount, whereby taxpayers may choose to use deductions in the specified list, but in total must not exceed the cap limit.
"It is possible that some tax-deductible expenses, particularly the purchase of retirement mutual funds, which has been used for quite a time to help maintain stability of the capital market, should be reduced," he added.
As for the financial transaction tax, the Finance Ministry has vetted a draft law to impose a tax on share sales at a rate of 0.11% of the value of shares sold. The draft law was approved by the cabinet under Prayut Chan-o-cha's administration and is being sent to the Council of State for further examination.
In the meantime, the Federation of Thai Capital Market Organizations has urged the ministry to abandon the collection of the transaction tax, claiming the stock market still needs tax incentives to support market development.
However, Mr Krisada said pushing the law forward is still in the ministry's tax reform plan.