
Finance Minister Pichai Chunhavajira recently unveiled a comprehensive tax reform plan designed to increase state revenue, support national development, enhance competitiveness and reduce domestic disparities.
His proposals were highlighted during the Sustainability Forum 2025 that promoted sustainable economic development, where he outlined significant changes to the taxation system.
A key measure is reducing the corporate income tax rate to remain globally competitive and align with OECD guidelines, which recommend a 15% corporate income tax rate for all businesses. Thailand's current corporate income tax rate is 20%.
Mr Pichai also proposed lowering the personal income tax from the current maximum of 35%, mirroring global trends aimed at attracting skilled workers.
Another major reform involves increasing the long-standing value-added tax (VAT) rate, which has remained at 7% since 1992, rising to potentially 15%.
Despite the rationale behind these proposals, the VAT hike has drawn intense criticism. Critics argue raising the VAT would disproportionately impact low-income households and exacerbate living costs.
In response to this backlash, Prime Minister Paetongtarn Shinawatra swiftly distanced the government from the VAT hike proposal, insisting it would not proceed.

Thailand's corporate income tax rate is the second-lowest in Southeast Asia, behind Singapore. In comparison, Malaysia's corporate tax rate is 24%.
FOCUS ON FAIRNESS
Athiphat Muthitacharoen, an economist at Chulalongkorn University's Faculty of Economics and a former economist for the US Congressional Budget Office, said such proposals come as no surprise because the government's fiscal burdens have significantly increased.
One area of concern is the ratio of interest expenses to the government's net revenue, a key metric measured by credit rating agencies.
The current ratio is 8%, but it is projected to exceed 14% in 3-4 years because of the government's substantial borrowing and declining tax revenue.
In two years, the ratio is expected to rise to 12%, placing Thailand at risk of a credit rating downgrade because countries that fall below investment-grade levels typically have a ratio of 10%, he said.
"Discussing tax reform is a complex issue that affects a broad spectrum of people. Simply proposing an increase in VAT alone is insufficient; we need to take into account the entire tax system," said Mr Athiphat.
"If such reform is to be undertaken, the government should consider three key conditions: the overall tax burdens of both businesses and households; the effective use of tax revenue; and a gradual implementation."
He said when considering the tax burden on both businesses and households, the government needs to find a way to make tax hikes appear fair to society.
For example, salaried employees bear 80% of the total personal income tax burden. However, only 4 million individuals pay personal income tax, though the labour force tallies 40 million. This means only 10% of the total workforce pays income tax.
"How can we ensure this group feels a sense of fairness? All tax deductions need to be reviewed to determine which ones are reasonable because income can generally be categorised into three types: from employment, such as salaries; from capital, such as capital gains from the stock market, dividends or interest; and from business operations," said Mr Athiphat.
"It's evident the majority of fully taxed income comes from employment, while capital income benefits from exemptions, as capital gains are not taxed, and business income is often difficult to track, particularly under Sections 40 (7) and (8) of the Revenue Code. It is essential to ensure fairness across these income types."
People also want to see their tax money is being used effectively, not only to combat corruption, but also to ensure investments and spending programmes are efficiently allocated and deliver tangible benefits, he said.
Moreover, Mr Athiphat said most successful countries do not raise taxes abruptly. For example, Japan planned its VAT increase from 5% to 10% over a five-year timeline, implementing the first hike in 2014 and reaching 10% in 2019.
Similarly, Thailand should establish a clear timeline for tax increases, allowing businesses to plan ahead while implementing measures to mitigate the impact on low-income groups, he said.
For instance, Japan maintains a lower VAT rate on essential goods. Some countries offer tax rebates for low-income individuals. Thailand could adopt a similar approach, such as increasing VAT to 10%, but refunding 3% to low-income earners, said Mr Athiphat.
In many countries, this is done by requiring goods be paid for via electronic systems. Thailand has the Pao Tang app, which could be used to determine whether an individual qualifies for assistance, and to process refunds directly through the app, he said.
"Tax reform must take into account the overall system to ensure fairness. For example, if VAT is increased, we must find ways to make it equitable. This means revisiting the entire tax base, including whether exemptions and deductions are still fair," said Mr Athiphat.
"If we don't address this, those already paying personal income tax -- such as salaried employees -- will have to bear the additional burden of the increased VAT. Only 4 million people pay personal income tax, meaning many others are not yet contributing."
He said although Thailand's top personal income tax rate is 35%, research shows the effective rate, after accounting for various exemptions and deductions, is only around 10% for those at the top rate, not the full 35%.
Thailand's corporate income tax rate is the lowest in Southeast Asia, second only to Singapore. In comparison, Malaysia's corporate tax rate is 24%. Thailand's investment promotion measures through the Board of Investment (BoI) remain competitive with other countries in the region.
"I believe the motive behind tax reform should be to increase revenue, not reduce taxes. If we lower taxes further, it will only worsen the fiscal burden. If our credit rating is downgraded, the chances of attracting investors will become even more difficult," said Mr Athiphat.

Presenters promote the Revenue Department's e-tax system. Varuth Hirunyatheb
GRADUAL INCREASE
Sanan Angubolkul, chairman of the Thai Chamber of Commerce, said Thailand's tax revenue accounts for only 17% of its GDP, a relatively low figure compared with other middle-income developing nations. While around 11 million individuals are registered as taxpayers, only 4 million actively contribute to the system.
"We need to enhance tax collection efforts and involve more citizens in the tax system," he said.
To drive economic growth and foster development, Mr Sanan stressed the importance of attracting foreign investment.
The chamber has advanced several proposals aimed at attracting more expatriates and enhancing foreign investment through tax and business incentives. A key proposal is reducing the corporate income tax rate to enhance Thailand's competitiveness, he said.
According to Mr Sanan, a reduction from 20% to 15% has been recommended, with dual benefits. First, it would alleviate tax burdens for companies, allowing them to hire more staff and better manage production costs, thus controlling inflation. Second, it would make the country more appealing to foreign investors.
Corporate income tax generates around 700 billion baht annually. A reduction of five percentage points could result in a revenue loss of about 130 billion baht.
To offset this shortfall, he suggested raising VAT, which contributes roughly one-third of total government revenue, amounting to around 900 billion baht annually. According to estimates by the chamber and the University of the Thai Chamber of Commerce, a 1% VAT increase could yield an additional 130 billion baht, effectively covering the loss in corporate tax revenue.
Mr Sanan said VAT hikes have been floated for decades, as the law allows an increase to 10%. However, successive governments have maintained the VAT rate at 7% since inception.
"The chamber supports a gradual increase, similar to Japan's approach, where VAT was first raised from 7% to 8%, then later to 10%. If Thailand's economy shows signs of recovery next year, hiking the VAT to 8% could help offset the loss in corporate tax revenue," he said.
Once the tax rate stabilises at an optimal level and the economy thrives, further increases from 8% to 10% could be considered, allowing individuals and businesses to adjust gradually while supporting long-term economic recovery, said Mr Sanan.
Somchai Sittichaisrichart, managing director of IT product distributor SiS Distribution, said the government has been spending more than it earns in revenue in recent years, a practice he deemed unsustainable.
He proposed increasing VAT collection as an effective way to boost government revenue, noting VAT charges are difficult for individuals to avoid.
"Neighbouring countries have VAT rates of 9-10%, while Thailand continues to maintain a lower rate," said Mr Somchai.
He said Singapore implemented a 9% goods and services tax, equivalent to VAT, while Indonesia's VAT is set at 11%, China's at 13% and Japan's at 10%.
Mr Somchai said Thailand's corporate income tax collection remains relatively low because of the small base of corporate taxpayers.

A sign of the Revenue Department in Thailand. Bangkok Post
DUBIOUS IDEA
Tanit Sorat, vice-chairman of the Employers' Confederation of Thai Trade and Industry, said the government's proposal to impose new tax rates on employers and employees raises questions about the potential benefits, particularly its goal of reducing domestic disparities.
However, he conceded Thailand could gain long-term advantages if the plan is implemented effectively.
While the government does need to replenish its dwindling coffers, Mr Tanit expressed concerns about the proposed tax adjustments, such as lower corporate and personal income tax rates alongside higher consumption taxes, potentially having adverse effects on the economy.
He said the proposal to reduce corporate income tax is questionable, noting the BoI already offers tax incentive packages to attract corporate investment, making this tax reduction less critical for increasing investment.
The reduction in corporate income tax rates, from 20% to 15%, may not be necessary for some companies, even though the lower rate is expected to help reduce the prices of goods.
"Many companies already have their own pricing strategies, such as offering discounts, to sustain their businesses," said Mr Tanit.
The proposed hike in VAT could also pose challenges by driving up production costs along the supply chain, he said.
"Take fish cans as an example. We need tinplate to make cans, lacquer for a protective coating, boxes and other materials for labelling and packaging. Prices of these materials will inevitably increase," said Mr Tanit.
While tax hikes could bolster state revenue, following years of budget deficits that led to borrowing, resulting in surging public debt, he cautioned tax reforms could lead to public backlash.
"Authorities may intend to use the additional revenue for new development projects, but I'm afraid it will be used to support populist policies," said Mr Tanit.
"The proposal appears to be a test of public sentiment, akin to the Thai idiom of throwing a stone to gauge directions or feedback. But in this case, the stone seems to have hit a wall and bounced back to the thrower."

Mr Pichai, left, recently proposed lowering the personal income tax from the current maximum of 35%, mirroring global trends aimed at attracting skilled workers. Chanat Katanyu
REDUCED FINANCIAL BURDEN
Natee Sithiprassasana, managing director of Surat Thani Green Energy, a biomass power plant operator, said a lower corporate income tax will ease financial pressures, particularly for small and medium-sized enterprises (SMEs) struggling to cope with the influx of low-cost Chinese imports.
"SMEs have limited budgets, so lower tax obligations combined with new state measures can provide essential support to their businesses," said Mr Natee.
He said local companies find it difficult to compete with cheap Chinese imports, driven by US trade barriers on Chinese goods.
Mr Natee said he was concerned about the impact of a VAT hike on small restaurants, as higher food prices could reduce customer numbers. He also stressed the need for greater fairness in VAT collection, as exporters are exempt from paying VAT on materials purchased for export purposes. However, SMEs involved in supply chains for exported products are still required to pay VAT, as they do not directly sell their goods abroad.