PwC advises govt to revise tax structure, regulations

Corporate October 30, 2013 00:00

By The Nation

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PricewaterhouseCoopers yesterday called on the government to improve the trade and investment environment and revise the tax structure and tax laws to attract foreign capital, tackle tax evasion by multinational firms, and ensure Thailand's competitivene

Sira Intarakumthornchai, chief executive officer and partner, said changes in the global economic landscape and new business trends and methods made it necessary to update the tax system, tax laws and policies pertaining to tax collection.
In the past couple of years, the tax planning of multinational firms has come under scrutiny and criticism from various governments and countries that have tried to find ways to collect more taxes and plug the legal loopholes that multinationals use to avoid paying taxes.
Even though Thailand is ready for the AEC, it must adopt a uniform tax system with other Asean countries, PwC says. The revised tax structure must effectively address the various equity holding structures of firms engaged in international business, such as direct equity holding or use of a holding company, the transfer of dividends and profits to the parent firm’s country, application of tax rates and the terms and conditions of regulations of each country that affect a company’s operations abroad. 
The Revenue Department should revise tax laws to promote investment and seek means to preserve cash within Thailand, such as by lowering trade barriers or supporting businesses wishing to invest abroad, said Taworn Rujivanrom, a senior executive of PwC. 
The government should give importance to the tax-evasion activities of multinational firms via various measures, such as the Controlled Foreign Corporation and General Anti-Avoidance Rules, he said.
The Revenue Department is ready to pave the way for investors using tax havens to remit profits back to Thailand without tax obligations, provided they bring in capital to invest. The department is also ready to expand the list of tax breaks for individuals to promote the legally correct issuance of tax invoices. 
The department hopes to draw revenue from business operators (holding companies) invested abroad in tax-haven countries, as these firms do not have to send profits back to pay taxes, so they do not remit funds back to Thailand. The department wants to provide an incentive (no tax obligation) for the remitting of funds back to Thailand. However, the remitted funds must be channelled into investment to stimulate the Thai economy, said Suttichai Sungkamanee, director-general of the department.
The department is reviewing whether the corporate-tax reductions from 30 per cent to 23 per cent last year and to 20 per cent this year have been beneficial by reducing tax evasion. The department will step up enforcement of corporate tax evasion via legal means.
It would like local financial institutions to cooperate in tracking tax-evasion activities. It may be necessary to introduce measures to force local financial institutions to cooperate with the department, Suttichai said.
As for the reduction of personal income tax from 37 per cent to 35 per cent and revisions from five to seven steps of tax payments, the personal-income-tax cut will be effective for this tax year ending March 2014. Currently, this issue is awaiting review by the House of Representatives. 
One way of helping individuals pay lower taxes is to submit tax invoices issued by retail stores to be used as tax deductions. This would also help reduce the volume of illegal tax invoices.
The department allows taxpayers to use the 40-per-cent income-tax rate, but not exceeding Bt60,000 per year. The department prefers to allow taxpayers more tax deductions than to revise the tax rate, he said.