It has certainly not been a good week. A shooting in broad daylight in the heart of Bangkok once again reopened debate on gun control, mental health, and accountability. Meanwhile, in the background, the baht continues its decline, a reflection of the state of the economy.
At a time when clear policies are needed most to instil confidence in the country, it seems the Revenue Department missed the memo when it announced new tax regulations, which have added to confusion and created an extra layer of uncertainty.
On Sept 15, the Revenue Department released a directive that mandates Thai tax residents (anyone who has lived in the country for more than 180 days) to report and pay income tax on funds remitted from abroad, starting on Jan 1, 2024.
Why now? Well, it's anyone's guess but a growing budget deficit may have something to do with it. The new tax law is expected to generate billions in additional revenue each year and help combat tax evasion.
Under the current tax law, Thai tax residents are only taxed on foreign funds sent to Thailand in the same year they were earned, a rule exploited by wealthy individuals and businesses.
The new tax law will close this loophole and ensure that all Thai tax residents pay up, regardless of when money was earned abroad and is sent to Thailand. The same domestic tax rate, 5% to 35%, will apply to remittances. In principle, the directive has good intentions, and follows the lead of other countries which require tax residents to declare and pay tax on foreign income, except when there are clear guidelines on exceptions and/or exemptions, which is not the case here.
This news is particularly troubling given its potential effect on foreign direct investment at a time when the country needs it most, especially as the prime minister has been personally attempting to woo investors.
Let's not forget how Srettha Thavisin played up potential investments from Tesla and Microsoft worth US$5 billion after returning from the 78th session of the United Nations General Assembly in New York.
He claimed "Thailand is open for business with all countries", but the new tax scheme could undermine Mr Srettha's efforts even before it has chance to take flight.
Clear policies and favourable tax regimes are necessary to attract foreign investment in a competitive global environment, especially since the tourism rebound remains uncertain.
If anything, the government should be giving tax breaks to foreign companies looking to invest, not raising their tax liability before they've even set up shop. Foreign investors are already wary of the complex Thai tax system, and the new scheme will likely compound their concerns. And with plenty of alternatives in the region, they won't think twice about going where they are treated best.
The next group of those who may be potentially affected and require clear guidelines from this rule change is the sizeable portion of retirees, remote workers, and foreigners living and working in the country. While it may not affect their day-to-day life, it could affect their decision to remit large sums of money into the country to finance large purchases such as condominiums or invest in businesses.
If they've already paid tax on the money abroad, the Revenue Department needs to clarify if the double tax treaty applies to ensure tax is not being paid twice. The department should consider all the scenarios and clarify applicability of the new tax law for each circumstance.
And the last question that remains is, what will Thai tax residents get in return? Can Thai tax residents regardless of nationality enjoy the same benefits as Thai nationals who have benefitted from previous government initiatives such as the "We Travel Together" scheme during the Covid-era, or the upcoming digital wallet handout? If not, how about better infrastructure, public health coverage, or government programmes that help the underprivileged? Or will this money disappear into the abyss?
No one will argue against the reasoning behind this move. Strict checks on money being brought into the country are needed to prevent money laundering and tax evasion. On the other hand, alienating investors, both business and individuals, with a single blanket policy is counterintuitive.
It's important the Revenue Department make clarifications and provide clear guidelines to help keep Thailand competitive amid uncertain times.