• 
• 

Published on March 6, 2008

"The temporary cut in corporate tax, meanwhile, is something the Thai fiscal position can afford, though one that we consider as unnecessary now, especially after the 7.1 per cent quarter on quarter growth in the fourth quarter of 2007," DBS said.

The government approved an economic stimulus package involving tax cuts and deductions in Tuesday's Cabinet meeting. Amongst other measures, the personal income tax waiver will be raised to Bt150,000 from Bt100,000 and the tax deduction for life insurance premiums will be doubled to Bt100,000. Corporate tax rates for listed firms will be cut to 25 per cent from 30 per cent for 2008 and 2009.

DBS suggested Thailand would do better to increase spending on education, in addition to infrastructure. Nonetheless, the measure is likely to further boost growth.

DBS said January 2008 data suggests that risks to its 2008 GDP forecast of 5.6 per cent actually lie to the upside.

"From this perspective, it would be ridiculous for the government to push the Bank of Thailand to cut rates," DBS said.

Sethaput Suthiwart-narueput, the top economist at Siam Commercial Bank, said the tax stimulus package was a positive move but he did not expect a huge impact on headline gross domestic product.

"The higher personal income tax deduction generates a limited impact on household income, which we estimate at about Bt5,000 in tax savings per qualifying individual per year (or Bt417 per month). Additional tax allowances for investment in retirement funds are good for the market but will not stimulate consumption as they raise the after-tax return to savings," Sethaput said in a report issued on Tuesday.

 "The measures to stimulate private investment are more promising," he said. "These are likely to include tax allowances for accelerated depreciation on equipment investment. While any measure to stimulate investment is welcome, we do note that tax allowances have had limited effectiveness and impact in the past because of administrative reasons.

"Tax/fee reductions on real-estate transactions are likely to benefit developers more than individuals. However, we do not expect the rally in real-estate to be as strong as in 2002 (when similar measures were introduced) which was also driven by pent up demand and low lending rates."

Major Development CEO Suriyon Poolvaralaks said he was confident the rate cuts in property transfers and pledging fees to 0.01 per cent from 2 and 1 per cent respectively would spur the property market. Prospective homebuyers will accelerate making their decisions to buy new homes.

In addition, the property-related businesses - home-builders, contractors, labour and building material merchants - will also receive benefits from the property stimulus package.

"Consumer spending will be back," said Suriyon, adding that Major Development's three property projects with a combined value of Bt8.3 billion are expected to transfer more benefits to its clients.

The Nation