Industry, banking committee to submit petition for govt decree
The Joint Standing Committee on Commerce, Industry and Banking will this week send a petition to the government requesting a decree on extending the current lower rates of value-added and income tax as a leg-up for the private sector.
VAT will return to 10 per cent after the law temporarily reducing it to 7 per cent expires on September 30, while the corporate-income-tax rate of 20 per cent and the progressive personal-income-tax rates are due to expire on December 31.
At its monthly meeting yesterday, the Joint Standing Committee concluded that maintaining the current VAT and tax rates amid the economic slowdown could reduce the burden on businesses and consumers, said Suphan Mongkulsuthee, chairman of the Federation of Thai Industries.
He said the committee wanted the VAT to be maintained at 7 per cent for at least two years, while keeping the corporate tax rate of 20 per cent could help restore business confidence and also attract private investment, including foreign investment.
If the current tax rates are not maintained, the economy could contract even more, he said, adding that the committee believed that the government would end up extending the legislation keeping VAT and income tax low.
The committee will make a formal request for such a decree this week, enactment of which would necessitate approval by the Election Commission.
Last week, Siam Commercial Bank’s Economic Intelligence Centre pointed out that the lack of a functioning government or valid quorum of lawmakers would continue to pose risks to the economy because of unresolved legal issues, including the extension of the current reductions in VAT and income taxes.
At the meeting yesterday, the Joint Standing Committee predicted that the economy could slump further if the political deadlock could not be resolved over the next six months and the situation turned violent. If the situation remains peaceful but the political unrest continues, gross domestic product might grow by 1-2 per cent. It could expand by 2.5-3 per cent if the political situation normalises next month.
Suphan said the meeting also discussed ways to help small and medium-sized enterprises, including asking for the assistance of the Thai Credit Guarantee Corporation.
He said small businesses in particular wanted sufficient cash flow to carry on their business over the next six months, and not just enough to service the interest on their debts. Their main problem, he said, was the difficulty of generating revenue from their existing inventories.
Boontuck Wungcharoen, chairman of the Thai Bankers’ Association, said all the banks had initiated measures to help their SME clients, and those in the export sector had been able to carry on, but those in agriculture had been affected by a plunge in prices of their produce.
He said the banking industry would be the last sector affected by ongoing political instability. He believes that overall lending growth could reach 6-8 per cent based on GDP growth of 2.5-2.7 per cent and export growth of 5 per cent.
Export in the manufacturing sector has shown signs of recovery, he said.
In the past, Thai economic growth has been mainly driven by exports and state spending, even in times of political instability.
“But now we don’t have a functioning government, which is a new phenomenon in Thailand, meaning many budgets cannot be allocated to enhance the economy,” he noted.