Experts agree that the National Council for Peace and Order (NCPO)’s decision to extend the cuts on personal and corporate income tax and maintain value-added tax at 7 per cent for another year will help maintain domestic consumption and continue to boost growth. The NCPO said VAT would remain at 7% from October 1st until September 30th 2015, while personal and corporate income tax reductions would be in place until the end of December next year.
Personal income tax at present is divided into seven categories instead of five and the rates – 5, 10, 15, 20, 25, 30 and 37 per cent – depend on the taxpayers’ income, while corporate tax is now capped at 20% instead of 23%. Vallop Vitanakorn, Vice Chairman of the Federation of Thai Industries (FTI), said his organisation welcomed NCPO’s decision to extend the tax rebates because it will help maintain people’s purchasing power and boost consumption, while lower corporate taxes will improve Thailand’s competitiveness and encourage investment. “Prices of consumer goods will rise if VAT is increased, which will then lower people’s purchasing power, and since the GDP relies greatly on domestic consumption, there is a need to maintain this purchasing power,” he said. As for keeping corporate income tax at 20 per cent, Therdsak said this policy was in line with the measures that had been put in place earlier to prepare for the launch of the Asean Economic Community (AEC).
The previous government had cut corporate income tax from 30 to 23 per cent to help boost the Kingdom’s competitiveness ahead of the launch of AEC next year. “The cuts will help maintain the country’s competitiveness since Thailand is already on the frontline in terms of tax rate and the measure is within the framework put in place by the previous government,” he said. Somchai Amornthum, executive vice president of Krung Thai Asset Management’s research department, said keeping VAT low would help ease the anxiety of consumers, but the government should eventually raise the tax to boost public income.