Benefits of negative tax aired

Economy August 08, 2014 01:00

By Petchanet Pratruangkrai


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If the National Council for Peace and Order finally gives the nod to a negative income tax, it will add 0.3 percentage point to economic growth and help reduce income disparities, according to the Centre for Economic and Business Forecasting.

The Fiscal Policy Office (FPO) is preparing to propose the negative income tax (NIT) to the NCPO to transfer income to the poor after academics agreed on the principles for narrowing the income gap.

Krisada Chinavicharana, director-general of the FPO, said yesterday that the office would accelerate the adoption of the NIT after receiving a good response from most academics.

"After our presentation on this issue on Wednesday, we will now go ahead with studying it in practice," he said.

In the first stage of the study, all of the academics’ comments will be interpreted.

Discussions with agencies including the Revenue and Comptroller-General’s departments will be held on practical aspects such as the tax-transfer process and the income-tracking method, along with penalties.

The NIT will push more people into finding work, as those with certain jobs would gain NIT benefits.

When low-income earners receive the NIT allowance, their need for government privileges or assistance, particularly from "populist" policies, should be reviewed, the FPO says. Those requesting NIT stipends will be required to file tax returns to the Revenue Department.

According to the proposed criteria, about 18 million people are classified as low-income earners and eligible for NIT benefits. Those eligible for NIT benefits must be between 15 and 60 years old. Those with no more than Bt30,000 in annual income would receive allowances at 20 per cent of their income or a maximum of Bt6,000 per year.

The policy is anticipated to help about 16 million people or 19 per cent of the poor to stay above the poverty line. Income inequality is forecast to improve by 1 per cent. The government would spend about Bt56 billion per year on the policy.

This study is based on the nine countries using NIT – the United States, New Zealand, the United Kingdom, Israel, Australia, South Korea, Sweden, Canada and Singapore.

Thanavath Phonvichai, director of the Centre for Economic and Business Forecasting, said a Bt56-billion budget was not too much if it could help spur the economy. He noted that other countries also utilised subsidies to help poor people, such as the United States, which has a "food stamp" programme.

Bolstering the incomes of poor people would also benefit the country, as more people would join the tax rolls. The Finance Ministry should be able to monitor and collect information about taxpayers more efficiently.

Now is a suitable time for Thailand to overhaul its tax structure because at the same time as the government plans to spend a lot of money to make the country a "welfare state", trade liberalisation will result in lower excise taxes, Thanavath said.