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Published on March 5, 2008

The government yesterday took a major step to boost the economy by approving a Bt42 billion tax-exemption package that will leave more money in corporate and individual pockets.

Within a month, the government will follow it up with a longer-term economic-stimulus package aimed at benefiting people living in rural areas.

The two packages together will help the economy grow 6 per cent this year, up from 4.8 per cent last year.

Deputy Prime Minister and Finance Minister Surapong Suebwonglee expressed confidence the government would be on target, while Olarn Chaipravat, an adviser to the Fiscal Policy Research Institute, estimates that Bt30 billion of the first Bt42-billion tax package will be spent this year.

The bulk of the Bt42-billion tax savings, approved by the Cabinet yesterday, will go to firms listed with the Stock Exchange of Thailand (SET) and the Market for Alternative Investment (MAI), the property market, salaried workers and small and medium-sized enterprises (SMEs).

Initial public offerings (IPOs) and newly listed firms can also benefit from the package if they apply for listing over the next 12 months.

For villagers and farmers, Surapong said the government was finalising increases for village funds and a debt moratorium for those in agriculture.

For the capital market, SET president Patareeya Benjapholchai said the measures would encourage more firms to list with the SET and the MAI.

During the previous economic crisis, these measures worked effectively, with up to 50 firms applying for listing per year to gain tax benefits, she said.

In addition, she said corporate earnings would improve, due to lower taxes.

To boost the property sector, which generally has multiple effects on economic growth, the government also agreed to cut the sector's business tax rate from 3 per cent to 0.1 per cent for one year.

The Interior Ministry will also reduce transaction and mortgage-registration fees for land, houses, townhouses, office buildings and condominiums to 0.01 per cent.

Earnings of listed property companies are projected to rise 14 per cent to 59 per cent if they can receive an estimated tax savings of 4.3 per cent on revenue, said one stock broker's report.

Property Perfect senior executive vice president Teerachon Manomaiphibul said the government's tax package for the property sector would reduce property prices nearly 5 per cent, 3.3 per cent from the reduction of the special business tax and 2 per cent from transfer fees.

The Nation