But will go ahead with new property and land tax as part of restructuring; Personal income, corporate tax rates need to be reviewed, says premier
Prime Minister Abhisit Vejjajiva yesterday pledged not to raise the value-added tax (VAT) during his tenure, but said he would go ahead with a new property and land tax as part of the restructuring of the taxation system.
Asked if VAT would be increased from 7 per cent to 8 per cent as suggested by a Finance Ministry study, he said such a move is unnecessary because the Thai economy is still in the recovery stage.
According to the VAT law, the maximum rate is 10 per cent, but the effective rate has been only 7 per cent over the past 11 years.
"I don't think we're going to raise the VAT next year, either," Abhisit said, adding the government is studying an overall restructure of the taxation system to boost efficiency and fairness.
"There are several parts of the restructure, covering decentralisation as in the new land tax, which we not only aim at redistribution of land ownership but also to adjust the tax revenue ratios between the central and local governments."
"Other issues [concerning the tax restructure] include trade liberalisation [which would lead to zero import duties] or the use of sin taxes," he said.
The premier added that it would take another six months to complete the study on restructuring the taxation system. In regard to the government's policy on social welfare, he said: "We're heading towards a society in which every Thai needs to have an insurance and security, but people will also have to play their role [as in a national savings programme in which the government will contribute to citizens' savings].
"It's not always necessary that we have to raise taxes to provide more welfare to the people as we may also expand the tax-payer base, minimise tax evasion or reduce corruption," he said.
Regarding the new property and land-tax legislation, the premier said the Cabinet had already approved the bill, which would be shortly considered by Parliament.
The bill will revamp the collection of property and land taxes with the objective of boosting efficiency in land use nationwide as unused land plots will be subject to progressive tax rates.
In addition, the bill will allow local government units to collect tax revenues directly from land and property ownership.
The prime minister also said that taxes on personal income, corporate income, excise, customs and
other rates all need to be reviewed
to expand the overall tax base,
reduce complexity and ensure fairness.
Given the government's policy on social welfare, critics earlier said the government might have to raise taxes to pay for new social welfare measures in addition to those already committed.
Over the past 18 months, the government has spent an estimated Bt300 billion in populist and social welfare measures to win public support, with the latest measure being a further extension of free electricity, bus and train rides for low-income earners, costing more than Bt20 billion per year.
Meanwhile, the Association of Investment Companies (AIMC) also voiced opposition to ending the tax deduction on long-term mutual funds (LTF).
Commenting on the Finance Ministry's policy of tax restructuring, which could lead to cancellation of tax deductions on long-term equity funds, AIMC President Voravan Tarapoom siad yesterday that the government should consider this matter cautiously.
Currently, LTF and retirement mutual funds (RMF) account for Bt130 billion to Bt140 billion, out of the total Bt340-billion mutual funds.
Somchai Pakapaswiwat, a Thammasat University lecturer, also said the economic condition remains too fragile to cope with higher
VAT. He said the global and Thai economic recovery is in an uncertain situation given the unclear recovery in the US and the European debt crisis.