Thai Tax Cuts Cost 150 Billion

August 5, 2011 Taxation in Thailand

Thai Tax CutsThe Revenue Department of Thailand has completed its report containing estimates for the cost of the country’s upcoming corporate tax rate cuts, illustrating that the tax revenues are expected to return to current levels in 3 years.

At a press conference held on August 4th in Bangkok, the Director General of the Revenue Department of Thailand Satit Rungkasiri revealed that new a report has been completed with projections for the fiscal effects likely to arise from the government’s planned corporate tax rate cuts.

As reported previously, the ruling Pheu Thai Party of Thailand intends to reduce the current 30 percent corporate tax rate to 23 percent by the end of 2012, and slash it to an even lower 20 percent in 2013. The Revenue Department has already prepared a draft of the Royal Decree, which will be presented to the government for approval shortly.

According to analysis prepared by the Department, the proposed tax cuts will cost the government approximately THB 150 billion in tax revenue losses over the next three years. It is expected that the change will see tax collections drop by THB 45 billion in 2012, THB 70 billion in 2013, and THB 35 billion in 2014. The revenue stream is expected to return to the levels seen in the fiscal year 2011 before 2015. The Director General explained that following the rate reduction, the country should see higher levels of foreign investment and business growth, and decreased levels of tax avoidance. He also pointed out that the lowered tax burdens should result in greater tax compliance and significant drops in the occurrence of tax evasion in Thai society.

International tax analysts believe that the diminished tax revenues from corporate income tax collections in Thailand will be balanced by the scheduled increase to national value added tax (VAT) rate. Earlier the Revenue Department announced that the VAT will rise from the current 7 percent to a new rate of 10 percent in September 2012.

The government’s tax revenues for this year are expected to be approximately 15 percent higher than targeted, which will also help balance the lowered tax collections of next year.

Photo by Justin Gaurav Murgai