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Published on February 21, 2008

The Federation of Thai Industries (FTI) has called on the government to cut the rate of corporate tax from 30 per cent to 25 per cent to stimulate private-sector investment.

A reduction in corporate tax is one of 13 proposals that the FTI drafted last month for the government's economic team.

The government now collects corporate tax at 30 per cent, which is higher than the rate in neighbouring countries, FTI vice chairman Adisak Rohitasune said yesterday.

"It might seem the government would have a lower income from a reduction in the tax rate. On the other hand, it would encourage the private sector to invest more and the government would eventually enjoy higher tax receipts in return," he said.

The FTI also asked the government to reduce import duties for operators who would like to improve their production efficiency by upgrading their machinery, as this would improve overall industrial competitiveness in the long run.

Adisak said that the Monetary Policy Committee should consider cutting the interest rate by 0.5 to 1 basis points to encourage consumption and reduce operators' production costs.

"We can respond to the government's policy of controlling product prices only in the short term. If our production costs remain high and domestic consumption is still low, we will need to raise our prices eventually," he added.

According to the FTI's monthly survey, manufacturers' confidence increased from 79.8 in December to 86 last month because of more orders, better business performance, increasing production and higher sales. The index also revealed the highest confidence among industrial operators for the past eight months.

Adisak said the new government was the main factor raising investor confidence.

He agreed with two main directions this government is taking. One is to stimulate grass-roots spending by various means and the other is to speed up investment by announcing the Thailand Investment Year campaign.

Meanwhile, Surapong Paisitpat-napong, spokesman of the FTI's Automotive Industry Club, said domestic sales of passenger cars in January surged 17.6 per cent from the same period last year thanks to the launching of E20 cars and more confidence in the political and economic situation.

The combined export of passenger cars, motorcycles and auto parts last month was worth Bt41.64 billion, rising 40.64 per cent year on year. Automotive production last month was 108,129 units, up 25 per cent, he said.

Chalida Ekvitthayavechnukul

The Nation