Justifying the digital wallet scheme
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Justifying the digital wallet scheme

As more pundits disparage the handout, the government seeks to clarify why the project is needed

Prime Minister Srettha Thavisin last week put an end to weeks of speculation about the government's digital wallet programme, saying it will begin in May next year.
Prime Minister Srettha Thavisin last week put an end to weeks of speculation about the government's digital wallet programme, saying it will begin in May next year.

The 10,000-baht digital wallet scheme is considered the flagship policy of the Pheu Thai-led coalition given its prominence in the election campaign.

Despite mounting criticism from academics and economists that borrowing 500 billion baht to fund the project may violate the 2018 State Fiscal and Financial Discipline Act, the Srettha Thavisin government is expected to push through this policy because if it is cancelled, the party may lose votes in the next election for failing to deliver.

What is the justification for the urgent handout?

The digital wallet scheme is expected to stimulate the economy, as the government set a target for average annual GDP growth of 5% during its four-year term.

The government wants to jump-start the economy to transition from a middle-income nation to an upper-income economy.

The stimulus is necessary because the Thai economy exhibits a "k-shaped" recovery following the pandemic, said the administration. This means the rich are getting richer and the poor are becoming poorer, widening the wealth gap and social disparity, as reflected by the household debt-to-GDP ratio rising to 91%.

Moreover, geopolitical tensions such as the Russia-Ukraine and Israel-Palestine conflicts are weighing on the global economy and hampering consumer purchasing power, say state policymakers.

Who is eligible to receive the digital handout?

The government wants the digital wallet scheme to commence in May 2024. Thai citizens aged 16 and older with a monthly income of 70,000 baht or less and deposits of less than 500,000 baht in their combined bank accounts are eligible for the digital transfers.

Based on these criteria, an estimated 50 million people are eligible, down from an original estimate of 56 million.

People who do not meet the monthly income or deposit limits are ineligible.

The scheme is expected to use the Revenue Department's database to calculate monthly income, including salary, bonuses and other sources of earnings to determine a monthly average.

How can the digital currency be used?

The scheme is expected to leverage the Pao Tang mobile app, which was used for cash handouts by the previous government as a stimulus measure during the pandemic.

Thais need to verify and authenticate their identity, known as know-your-customer (KYC) authentication, via the app. For those who have completed KYC on the app, there is no need to do it again.

Roughly 40 million people have completed KYC on the app, leaving an estimated 10 million who must complete the KYC process to be eligible for the scheme.

When completing KYC authentication, citizens must verify their rights on the app. Failure to do so blocks the use of the digital money.

The government is slated to open the verification of rights process in March 2024.

What are the terms and conditions of the digital wallet?

The government plans to implement the scheme in May 2024, with the validity lasting for six months from the first use, or until the end of October 2024.

If not fully used, the remaining balance is transferred to the Treasury Department.

People may jointly use the digital money to purchase certain goods for mass usage. For example, if a farmer wants to buy a small rice mill machine worth 100,000 baht, he can form a group of 10 people and combine their digital money to purchase it.

Recipients can use the digital money to purchase food, beverages and consumer goods.

They cannot use the handout for services, online purchases, alcohol, tobacco products, marijuana, cannabis-related products, or items derived from these substances. In addition, the handout cannot be used to buy gift cards, cash cards, gold, diamonds, pearls, or to pay off debts, tuition fees, or utility bills, including water, electricity or telephone charges, or to buy fuel or natural gas.

Converting the digital wallet funds into cash or exchanging the handout in various markets is also prohibited.

The geographical limit for use of the digital wallet is expected to be extended from a four-kilometre radius of the recipient's registered home to the boundaries of their home district.

Can the digital money be used at all stores?

Purchases can be made at all stores, including those operating within the tax system and those outside the tax system.

As a result, street vendors, mom-and-pop shops and shops that exclusively accept digital payment via apps can accept these transactions if they are registered to receive these payments.

Registered vendors can cash in the digital money at state banks at any time before the end of April 2027 if they are in the tax system.

Vendors outside the tax system can use the digital money to purchase goods, but cannot cash it in at state banks.

The digital wallet scheme is intended to increase spending during the six-month period after its launch.

Deputy Finance Minister Julapun Amornvivat recommends participating shops and stores join the tax system or register for value-added tax if their annual income tallies 1.8 million baht or more as a result of participation in the scheme. Vendors have the right to claim tax deductions if the purchase tax is greater than the sales tax, he said.

Backed by the security of blockchain technology, the digital wallet should minimise financial risks and offer a safe channel for various financial transactions because it is completely traceable, Mr Julapun said.

How will the project be funded?

The scheme is estimated to cost the government 500 billion baht and will be funded through a one-time loan, he said.

The government plans to propose a bill seeking a special loan of 500 billion baht, which will be vetted by the Council of State this year to ensure it does not contravene any laws.

Following vetting, the bill will be forwarded to parliament, in line with Section 53 of the State Fiscal and Financial Discipline Act of 2018, so the scheme can start in May, said Mr Julapun.

Are there any alternatives to help those ineligible for the scheme?

The recent revision of eligibility for the handout excluded 3.5 million people.

As compensation for those ineligible, he said the government plans to offer another stimulus measure early next year: tax refunds through the e-refund project.

Participants must submit their tax returns with corresponding e-receipts for the government to reimburse the taxed amount.

To be eligible for the e-refund, Thais must purchase goods and services from businesses that are part of the tax system, especially those that issue electronic invoices, to receive a tax deduction of up to 50,000 baht.

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