VAT hike next on the tax agenda

VAT hike next on the tax agenda

Rate to hit 8% next year, says ministry

The first increase in value-added tax (VAT) in more than a decade is expected next year, to 8%, says Suwit Rojanavanich, a bond market adviser to the Public Debt Management Office.

VAT could then gradually increase further to the ceiling of 10%, but the timing would have to be appropriate, he said.

The tax was introduced in 1992 at a rate of 10% but immediately reduced to 7% at the request of business operators who felt the rate was too high. It was supposed to rise to 10% in 1997 but the onset of the economic crisis prompted the government to leave the rate at 7%, and successive goverments have renewed the reduction several times since then.

The National Council for Peace and Order earlier approved an extension of the 7% rate for another fiscal year, to Sept 30, 2015, with the aim of smoothing domestic consumption, which has faltered since the second half of last year.

Mr Suwit expects the VAT hike will be pushed after the inheritance and gift tax, land and buildings tax and the excise tax base change take effect.

Tax reform to foster fairness, narrow economic disparities and boost state coffers is at the heart of the interim government's agenda.

"There's an important issue to be discussed by the cabinet next Tuesday. The issue is a major step towards laying the foundation and beefing up the country's competitiveness," Mr Suwit said without elaborating further.

Regarding a capital gains tax, he said the Finance Ministry had no plans to impose one any time soon but that it could be considered in the future.

Apart from taxation, the Finance Ministry is considering how to boost per capita income in the long run to extricate the country from the middle-income trap.

Becoming a high-income economy requires long-term planning to increase per capita income, Mr Suwit said.

To quicken the pace of economic recovery, the Finance Ministry is encouraging all state enterprises to speed up drawing down the remaining fiscal-2014 budget as well as next year's budget.

Prime Minister Prayut Chan-o-cha on Thursday promised to stimulate the economy in the first quarter of fiscal 2015, which begins next Wednesday, in a last-ditch effort to boost the country's economy in the final quarter as other engines — exports, tourism, domestic consumption and private investment — remained stagnant.

He urged all state agencies to accelerate disbursement of the outstanding budget for fiscal 2014, worth roughly 160 billion baht, within the first quarter of fiscal 2015.

Under the fiscal-2015 expenditure of 2.575 trillion baht, almost 100 billion has been set aside for infrastructure development, mainly electric railways.

The Finance Ministry plans to approach the private sector and retail investors to invest jointly in the government's new infrastructure projects.

Investment could be through infrastructure funds or public-private partnerships.

Mr Suwit said the effect on the economy from accelerating the budget disbursement would be seen in the next three to six months.

In the meantime, Saha Pathanapibul chairman Boonchai Chokwatana said political conflict and uncertainty had obstructed projects that were designed to serve the country's economic growth.

He urged the government to promulgate laws that ensured the continuity of infrastructure development while eliminating corruption.

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