The cabinet has approved the extension of the 7% value-added tax (VAT) rate for another year until Sept 30, 2019 to maintain the country's economic stability.
Nathporn Chatusripitak, an adviser to the PM's Office Minister, said on Tuesday the extension is estimated to cost the government 258 billion baht in lost revenue from tax collection until Sept 30 of next year.
The 7% tax rate, which has been extended several times, was set to expire on Oct 1.
The VAT was first introduced in 1992 at a rate of 10%, but was slashed to 7% in late 1997 at the private sector's request.
The rate has been kept at 7% ever since.
Mr Nathporn said the Finance Ministry proposed the 7% VAT rate be maintained for another year, as a hike could hamper private consumption and raise the prices in goods and services, impeding the country's economic growth.
"The Thai economy is now in an uptrend, while farm prices are increasing," he said. "Any VAT hikes may possibly derail such trends."
Mr Nathporn said the Finance Ministry reported to the cabinet that the Thai economy is forecast to grow by 4.2% this year, up from 3.9% in 2017, driven largely by strong exports and tourism from improving economies, particularly Thailand's key partners.
The ministry also reported that government expenditure and public investment are expected to increase, while planned large-scale infrastructure projects, the development of the Eastern Economic Corridor and special economic zones have made good progress.
In a related development, the cabinet approved a draft bill to establish a Pracha Rat Fund for low-income earners. It will function as a revolving fund to ease potential harm to low-income earners.
The cabinet also approved the allocation of 2.7 billion baht from its 2018 fiscal budget to finance the Pracha Rat Fund.
A committee set to supervise that fund will be established to ensure spending efficiency.
The committee will be chaired by the Finance Ministry's permanent secretary, a representative from the Budget Bureau, and no more than three experts.