Fiscal options under review

Finance Minister Surapong Suebwonglee said yesterday he had asked the Fiscal Policy Office to study whether a cut in corporate tax would boost private investment, and how the government could help people increase their incomes.

Surapong said he also planned to meet the Tourism and Sports minister to discuss measures to promote these sectors.

He said high oil prices and the world economic slowdown had undermined investor confidence. Surapong said that given the unfavourable conditions, the Fiscal Policy Office should consider whether tax cuts would have a negative or positive impact on the economy.

Economists and businesspeople have long been urging the government to cut corporate tax from 30 per cent to 25 per cent or even 20 per cent. They have argued that the current rate is too high when compared with tax rates in other countries in the region.

Tax cuts should lower business costs and improve their competitiveness against overseas companies.

While many have been asking for a corporate tax cut, there is also a proposal for the government to raise Value Added Tax from 7 per cent.

However, considering the current economic slowdown, raising VAT could hurt consumer spending. Even so, there are expectations of a 1-percentage-point hike in VAT.

In other developments, Surapong said he would meet executives of state-owned banks, known as specialised financial institutions, to discuss margin lending and deposit rates. He said that if state-owned banks could reduce their 4 per cent margin to 2 per cent it would help people to cope with economic hardship. He said he would discuss raising banks' capital requirement and a proposal to delay the implementation of IAS 39, a new accounting-practice standard.