Corporate Tax Could be Halved in Thailand
The Revenue Department of Thailand has indicated that it is investigating reducing the national corporate tax rate to a level equivalent to Singapore’s, in an effort to increase Thailand’s competitiveness among other South-East Asian nations.
Over the weekend the Deputy Director General of the Revenue Department of Thailand Anant Sirisaengtaksin indicated that the country’s corporate tax rate could soon be reduced to 18 percent, from the current level of 30 percent. The move would be accompanied by a 3 percent increase in the Value Added Tax (VAT) rate, to a level of 10 percent, aiming to offset any revenue losses the Government might see from the tax rate reduction.
According to the Deputy Director, the rate slash is being considered in preparation for Thailand’s upcoming membership to the ASEAN Economic Community (AEC) in 2015. The AEC is an agreement between the 10 member nations of the Association of South East Asian Nations (ASEAN), which will allow the untaxed movement of goods, investment and labor between the partner states. Anant Sirisaengtaksin claimed that Thailand’s geographic location among the other nations of the ASEAN community gave the country a competitive economic advantage, and a favorable tax system would serve to greatly increase business investment and boost the country’s competitiveness.
Anant Sirisaengtaksin also said that the reformed tax rates would allow the Revenue Department an opportunity to review the national tax system and potentially expand the tax base to cover a greater number of revenue sources, ultimately increasing government revenue levels. He added that while some experts might frown at the possibility of raised VAT levels, Thailand still has one of the lowest VAT rates in the world and a small increase would do little, if any, significant harm to economic activity. The Deputy Director also indicated that the Board of Investment of Thailand, a Government agency concerned with promoting business investment into the country, could lose its privileges in granting tax breaks and incentives to any corporate entity subject to the reduced income tax rate.
No indication was given by Anant Sirisaengtaksin for a potential time-frame to the proposed changes, although all alterations would need to be carried out by 2015. Local political analysts have suggested that the rate changes would not be initiated in 2011, as the country will soon have an election and political figures are likely to shy away from the always controversial topic of taxes for these elections.
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