Proposed VAT reduction rejected

He noted that the government has enforced several tax measures to stimulate the economy, and if VAT is reduced, it would deplete the government's revenue.

"VAT is a major source of revenue. For two years, we have delayed the increase in VAT to 10 per cent and instead focused on boosting the economy through higher tax deduction allowances, higher depreciation costs, and a cut in special business tax for the property sector.

Inclusive of the six recently-endorsed measures, we have lost a large amount of revenue and there is no need to enact a tax measure to control product prices. Indeed, the lower fuel excise taxes should reduce costs and allow manufacturers to hold on the planned price increases," he said.

The Commerce Ministry, which is expected to keep manufacturers control the prices of over 1,000 items, suggested the VAT cut to help delay the price increases.

Surapong noted that manufacturers would need to control their costs and adjust themselves to the new cost through higher efficiency. Meanwhile, the government will prevent the stagflation - low demand amid high inflation.

He also believed that inflation pressure in the second half would be weakened, due to the declines in global oil prices.