THE CABINET yesterday approved the Finance Ministry’s proposal to cut personal income tax for executives, experts and researchers working in the three Eastern Economic Corridor (EEC) development-project provinces of Chon Buri, Rayong and Chachoengsao.
The new single rate is 17 per cent, sharply down from the progressive income-tax rates of 5-35 per cent.
However, the new tax rate will apply only to those who are employed in 10 targeted industries: next-generation automotive; smart electronics; affluent, medical and wellness tourism; agriculture and biotechnology; food for the future; robotics; aviation and logistics; biofuels and biochemical; digital; and medical hub.
The Finance Minister, Apisak Tantivorawong, said earlier that a new flat tax rate of 17 per cent would attract more foreign direct investment to Thailand, as the Kingdom had to compete with lower-tax economies in the region, and Hong Kong and Singapore in particular.
The progressive rates for personal income tax in Hong Kong and Singapore are 2-17 per cent and 2-22 per cent, respectively, depending on income bracket.
The government has commenced spending on EEC-related infrastructure projects, including double-track rail, U-Tapao International Airport and the new phase of expansion at Laem Chabang port. It is also considering a high-speed train route between Bangkok and the EEC in order to provide incentives for private investment.
The government has high hopes that the EEC project will lift Thailand’s economic-growth rate to 4-5 per cent, from the current level of about 3 per cent.
Critics, however, are not sure whether a lower tax rate will draw more private investment, arguing that there is a high financial risk should private investment not meet expectations.
Infrastructure investment could then turn out to be a waste of public funds, said Pipat Luengnaruemithchai, an analyst at Phatra Securities. He also pointed to the Computer Act, suggesting that the law’s limit on the freedom of expression would be an obstacle for new investment in digital businesses in the EEC.