Tax plan turnoff
Re: "Overseas earnings targeted", (BP, Sept 19).
Is the proposed tax on foreign income in Thailand's national interest?
Suggestions that foreigners who don't like the new tax on foreign income should simply leave are at best naive and fail to reflect the interests of the nation. Those who understand Thailand's economy know it is heavily dependent on foreign currency remittance. Foreign currency inflows act as a critical support for the baht, and remains an important driver of the Thai economy.
This is the reason respective Thai governments worked tirelessly to attract affluent long-stay foreigners to its shores. The new tax on foreign incomes will work to undermine decades of progress in this critical policy area. Good faith cannot simply be restored by reversing this ill-conceived policy once the damage is done.
Tax planning is the single most important consideration for affluent foreigners. The many residency programmes offered around the world, many even in EU countries, make an effort to exempt long-stay foreign residents from taxes on their foreign income remittances. So fierce is the competition for foreign currency inflows that some countries go to extraordinary lengths to lure affluent foreigners, providing access to social services, the benefit of permanent residents and even a clear path to citizenship.
If the new tax proposal is implemented on Jan 1, from a tax perspective, Thailand will become one of the least attractive destinations for foreigners. The new tax proposal will force many affluent foreigners, and their critical foreign currency inflow, to more tax-friendly shores, and those that do remain will be reluctant to remit more than meet their basic needs.
This will not only slow foreign currency inflows, putting further downward pressure on the baht, adding to inflation and necessitating the Bank of Thailand to increase interest rates, but it has the potential to inflict serious and permanent damage on major sectors of the Thai economy. The Thai property sector has the most to lose as Thai residency loses its appeal to foreigners, but it does not stop there, discretionary spending on motor vehicles, luxury goods, healthcare services and even finance and insurance services are all at risk.
Not to mention the loss of indirect taxes generated by long-stay foreigners, such as stamp duties and value-added taxes. Far from meaningfully contributing to the funding of the stimulus, the tax on foreign income remitted will make the situation much worse and may even create more inequality and suffering for ordinary Thais.
MP Foscolos