VAT relief for welfare recipients backed

Economy August 10, 2018 01:00

By   THE NATION

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A PROPOSAL to reimburse the holders of state welfare cards for the value-added tax (VAT) they make on purchases has won backing from a prominent think tank.



The Thailand Development Research Institute (TDRI) said it vows to the support the relief measure that would benefit the 11.4 million people who have been handed the welfare cards.

Somchai Jitsuchon, the research director for TDRI's inclusive development, said that the initiative would help these low-income earners who would effectively receive back the 7 per cent VAT that they are charged on purchases made with the welfare cards.

The proposal should be allowed to run for at least a year before an evaluation is made, Somchai said. An advantage for the government is that it could use such a period to gradually raise the VAT, he said.

Previously, suggestions to increase the VAT were shouted down out of concern for the impact on the poor and other low-income earners.

In the future, if the government raises VAT from 7 per cent to 10 per cent, low-income earners would not be affected due to the proposed VAT rebate to them, Somchai said. Moreover, the government will earn more tax revenue after having maintained the VAT rate at 7 per cent over recent decades.

 “If this measure were to be combined with the VAT increase, this would solve the country's fiscal problems and spare the government any criticism that would have come from increasing the burden on the poor,” he said.

Somchai said that, after a recent discussion with Ministry of Finance, it was viewed that the reimbursement of VAT via the welfare cards had merit, but that care would be required on the amount of VAT that would be returned into the cards. If no limit were set, that could create a loophole for the benefit of those with much more money to use low-income earners' rights for the VAT return.

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Earlier, Finance Minister Apisak Tantivorawong said that Ministry of Finance would launch a measure to return VAT to low-income earners who use welfare cards through an electronic data capture (EDC) system in an effort reduce their financial burden and stimulate spending. It was suggested that the measure could be applied late this year.

The measure, which is now under discussion with the Revenue Department on the details of how it can be carried out, is expected to come into force in the last three months of this year.

In principle, the planned VAT return to low-income earners will not damage the VAT structure as the return procedure would follow a similar model to that applied for the return of tax under the government’s first-car policy. A budget will be established for the reimbursements.

Welfare-card holders can use the money that it credited into their cards for a range of everyday purchases. But this excludes so-called sin products such as cigarettes and liquor. Spending data will be connected with the Revenue Department's database and a tax return request can be submitted normally after the end of each year.

Some 11.4 million low-income earners would be eligible for the VAT reimbursement once a year. Discussions are continuing on the limit to be set for VAT reimbursement.

"Over the past two to three years, the ministry has launched measures for tax deductions of no more than Bt15,000 to stimulate domestic spending as Thai people then had less purchasing power,” Apisak said.

“This year, we don't have to do that measure. We are turning our attention to the care of the group that we've never taken care of before, such as the group of low-income earners. How will we be able to help? When they buy products, will they be able to receive the VAT return?”