Lack of progress in tax policy coordination between Thailand and other Asean members could lead to disputes and taxpayers could end up being victims, tax experts said.
Tax disputes are already happening as different parties interpret domestic tax laws differently. In some cases, it leads to taxpayers suffering from double taxation imposed by Asean governments, Prapas Kong-ied, a judge at the Central Tax Court, said yesterday.
Many tax disputes have happened and in some cases recently, the Supreme Court had to issue a ruling, Prapas said at the Asia-Pacific tax forum hosted by the Fiscal Policy Office.
A Thai citizen, only identified as Mr P, worked for a Thai company which had its business in the Philippines. P lived in the Philippines for a whole year and he received income from the parent company based in Thailand. The problem is to which country he should pay tax. According to the Revenue Code, he was not resident in Thailand that year, so he is not subject to tax payment. But when his parent company paid his salary, the company levied withholding tax and transferred the deducted money to the Revenue Department. Thai tax experts do not have the same view about withholding tax. Some say there should not be any withholding tax since the source of income is derived from activities in the Philippines. But the Revenue Department insisted on collecting the tax. The dispute was brought to the tax court, and the Supreme Court ruled in favour of the tax officials.
With the Philippines tax officials also collecting tax, Mr P found himself making a double tax payment.
Although the two countries have a double taxation agreement, it cannot be enforced in this case as Mr P did not live in Thailand in that year, so the agreement could not apply to this case, said Prapas.
Another interesting case involves a Thai consultancy that provided advisory services to another firm based in Indonesia about which Thai firms the Indonesia-based firm should buy its products from. The Indonesian firm followed the advice of the Thai consulting firm.
The Thai firm was paid for its services. The firm thought that since it had exported its services, it was not subject to a 7-per-cent value-added tax (VAT). But the Revenue Department insisted on collecting VAT on the service by arguing that the service took place in Thailand as the Indonesian firm had imported products from a Thai firm.
Prapas said that he himself – as a judge at the Central Tax Court then – had ruled that the consulting firm need not pay the tax. But the Supreme Court last month handed the final verdict in favour of the Revenue Department.
“The Supreme Court’s verdict has sparked a hot debate among tax academics,” said Prapas.
Rob Preece, associate director of the Centre for Customs and Excise Studies, University of Canberra, said that standardisation and harmonisation of excise and like taxes is missing from the AEC blueprint. He was referring to the Asean Economic Community, the regional single market and single production base, which would eliminate import tariffs and remove non-tariff barriers to facilitate the free flow of goods, services and labour.