The Finance Ministry is expected to complete its tax-restructuring proposals this month, with the new system offering both tax cuts and hikes in different areas.

Spokesman Somchai Sujjapongse said the ministry had made a comprehensive study of restructuring for corporate income tax, personal income tax, excise duty and import duties. The overhaul is aimed at raising the competitiveness of local industries, he said.

His statement suggested a reduction in import duties could be expected, while a rise in excise is on the agenda. Duty reduction would benefit importers of raw materials and capital goods. The ministry wants to introduce the new excise regime to compensate for revenue lost from tariff reduction.

Individuals are expected to benefit from the new structure but it is uncertain whether the ministry will cut corporate income tax. Currently, legal entities incorporated in Thailand are obliged to pay a 30-per-cent tax rate.

As new investment destinations like Vietnam offer lower tax rates than Thailand's, some agencies have expressed concerns over the exodus of investment from the Kingdom.

The Stock Exchange of Thailand has asked the Finance Ministry to extend the period whereby special tax rates are offered to those listed on the main bourse and the Market for Alternative Investment, which lists smaller-capitalisation companies. At present they enjoy 25-per-cent and 15-per-cent rates, respectively.

The request received a cold response from the ministry, which said the exchange should instead find new strategies to attract new listings.

The SET's request comes at a time when the government is experiencing revenue shortfalls. For the 2007 fiscal year it is expected to run a Bt150-billion budget deficit.

Somchai said a survey of 200 listed firms showed an average tax burden of only 17 per cent, while actual corporate tax is 30 per cent. Listed firms benefit from several tax breaks, he said.

However, a survey by the World Bank entitled "Doing Business 2007" released last week suggested local firms face tax payments at an average rate of 40 per cent.

According to the World Bank survey, firms also complain about time-consuming bureaucracy in tax payment, which increases their operating costs.

The draft of the tax-restructuring package will be submitted to the permanent secretary of finance, Suparut Kawatkul, and caretaker Finance Minister Thanong Bidaya this month, Somchai said.

Wichit Chaitrong

The Nation