The government may be forced to run a larger fiscal deficit next year than previously estimated, due to lower tax revenues arising from the bleak economic climate.

"It is likely," Deputy Finance Minister Sommai Phasee said yesterday when asked whether the fiscal deficit next year would exceed the estimated Bt120 billion planned by former finance minister MR Pridiyathorn Devakula.

The Cabinet yesterday assigned the Finance Ministry to revise the government budget for fiscal 2008, which starts in October, Sommai said after the meeting.

The ministry, the Budget Bureau, the Bank of Thailand and the National Economic and Social Development Board will discuss the issue next week.

He said economic conditions had changed and this could negatively affect government revenue next year.

Earlier, the Cabinet approved the budget plan for 2008 proposed by Pridiyathorn, with expenditure at Bt1.63 trillion, up from Bt1.57 trillion during the current fiscal year. Government revenue was targeted at about Bt1.51 trillion, leaving a budget deficit of Bt120 billion for the next fiscal year. The deficit for the current year is estimated to be Bt146 billion.

Meanwhile, Sanit Rangnoi, director-general of the Revenue Department, conceded that revenue next year would be negatively affected by government tax measures to boost the property sector.

Finance Minister Chalongphob Sussangkarn plans to seek Cabinet approval next week to increase the tax allowance to Bt100,000 from the current Bt50,000 for people who pay interest on a mortgage.

Sanit said the current allowance was costing the government revenue of about Bt2.5 billion a year. The doubled allowance would cost more, but exactly how much depend on how many taxpayers utilise the tax break, he added.

A tax package to boost the economy in the restive South would also affect government revenue this year and next.

The Revenue Department may miss its target by Bt30 billion for the current fiscal year, he said. Latest collections suggested that tax revenue in May will miss the target by Bt15 billion, as profits of commercial banks have dropped due to an increase in reserves against doubtful loans.

Sanit also signed an agreement with Krungthai Card yesterday, allowing people to pay tax using KTC credit cards. The project will start on June 1 for Bangkok residents, with KTC charging 2 per cent of the tax payment as a service fee, including value-added tax.

In a related development, the Public Debt Management Office reported that public debt as of March 31 was Bt3.21 trillion, or 38.1 per cent of gross domestic product.

Over the first seven months of the 2007 fiscal year, the government paid debt totalling Bt87.87 billion, it said.

Wichit Chaitrong

The Nation