The Finance Ministry will offer tax allowances on mortgage-interest payments of up to Bt100,000 - up from Bt50,000 - as a way to boost the property sector, said  Finance Minister Chalongphob Sussangkarn.

The higher allowances will benefit up to four million home-buyers.

However, according to Chalongphob, the ministry has decided not to lower other property-related taxes - house transfer fees, mortgage registration fees or special business taxes that are imposed on property companies.

"The downward interest trend has contributed to a better sentiment. Therefore, it's unnecessary for a larger tax package. Moreover, more tax cuts could hurt the central government's revenue as well as the revenue of local governments," said Khan Prachuabmoh, president of the Government Housing Bank and adviser to  the finance minister.

He added that Chalongphob may submit the proposed tax allowance to the Cabinet for approval next week.

The Bank of Thailand's Monetary Policy Committee is expected to lower its policy interest rate again tomorrow, according to Deputy Prime Minister and Industry Minister Kosit Panpiemras.

"However, it depends on the MPC's view whether the rate should be lowered by 25 basis points or 50 basis points," he said after a meeting of the government's Economic Steering Committee.

"The business sector will feel the impact of the rate cut three to six months later. Indeed, the previous cuts should [now] have sent a gradual impact on the economy."

Economists expect the MPC to make a 50-points cut, due to a worse-than-expected economic picture. However, the recent spike in oil prices, which drove the retail price of octane-95 petrol above Bt30 per litre, could pose some risks on inflationary pressure and such fears could drive the MPC to adopt a milder cut.

The policy rate has been slashed by one percentage point since the beginning of the year. It is now 4 per cent.

Kosit said the steering committee also believed there were positive signs in private investment and consumer spending, because of the government's acceleration of budget disbursement. The panel considered a survey by the University of the Thai Chamber of Commerce, which showed that consumer spending should pick up in the third quarter.

The steering committee is of the view that rate cuts and tax measures will boost the sagging economy, Kosit said, adding that it will seek discussions today with ministerial representatives, the Federation of Thai Industries, the Board of Trade and the Thai Bankers' Association on further assistance measures to sectors that have been affected by deteriorating consumption.

The panel regards as urgent a series of measures to help businesses in the three southernmost provinces, which have been hard-hit by insurgent violence.

The private sector has made five suggestions to help businesses in the deep South, including a reduction in insurance premiums, the provision of special-rate loans, additional Board of Investment tax privileges for investment projects, additional income tax privileges and minimal limitations on government budget disbursement.

Chalongphob will take care of the proposed income tax measures and his deputy, Sommai Phasee, will prepare revised budget disbursement rules and regulations, Kosit said.

Chalongphop said the proposed corporate income tax cut "will not largely affect government revenue".

Kosit said he and Chalongphob would discuss tax rates for eco-car projects on June 5. The Finance Ministry has reportedly agreed to lower excise duty on small-car production from 30 per cent to between 15 and 20 per cent.

The project is expected to draw large amounts of new investment into Thailand.

Wichit Chaitrong

The Nation