Sharp cut in corporate tax mulled

[PeteC]

What is this going to do to your average Thai consumer? Conveniently they don't state what the proposed increase in VAT may be. I can see it as a possible boon for the Mom and Pop type stores that do not charge VAT, as consumers may flock back to them once again and avoid the Big C type stores. I can see it resulting in a big cut in domestic leisure travel where a hotel stay is required. I can see it hurting the retail sector across the board, from automobiles on down. I can see it hurting the hotel industry from a foreign tourism perspective as it's yet another added cost that possibly could be avoided by going to another country. I see it as more ammunition for the Red Shirts, as a VAT increase would hit the poor the hardest. I doubt it has much to do with attracting or retaining more foreign corporations, but has everything to do with fattening the coffers of Thai owned companies and the fortunes of their Thai owners. The only very slim positive aspect is that it may produce additional jobs. Pete

http://www.nationmultimedia.com/2010/11 ... 42519.html

Sharp cut in corporate tax mulled
By Business Desk
The Nation
Published on November 18, 2010

Finance Ministry officials are tweaking a package of tax reforms, with the likelihood that the corporate-income-tax rate will be cut aggressively from 30 per cent to 18 per cent in return for an increase in value-added tax.

Satit Rungkasiri, director-general of the Revenue Department, said at a seminar yesterday hosted by Siam Rath that the proposed reform package would be presented to Finance Minister Korn Chatikavanij early next year.

One proposal is to increase VAT from the current rate of 7 per cent, he said, adding that every percentage-point VAT increase would increase government revenue by Bt60 billion.

Corporate and personal income tax would be reduced, with every percentage-point cut slashing revenue by Bt6 billion.

Satit said corporate income tax might be cut to 18 per cent from the current 30 per cent, while the highest progressive rate of personal income tax would be lowered to 25 per cent from 37 per cent.

Local and foreign corporations have complained that Thailand’s corporate tax rate is too high when compared with those in other countries in the region. Many business leaders have therefore proposed a cut to make the Kingdom more attractive to foreign companies.

Thailand recently advertised itself as a destination for the regional headquarters of multinational firms, but only a few have submitted proposals so far. Under that package, expatriates working for a regional HQ are also subject to lower individual income tax.

According to KPMG’s 2010 tax survey, global average corporate income tax stands at 24.99 per cent. However, in Southeast Asia, the rates of Thailand and the Philippines are the highest at 30 per cent, compared with the 17 per cent imposed by Singapore.

Satit also said there was an option partially to remove tax privileges granted by the Board of Investment. The ministry could even completely abandon the BoI’s tax incentives.

At present, to attract new investment, the BOI extends the maximum eight-year corporate-income-tax exemption on approved investment projects. Some tax privileges also cover the import of machinery.

The ministry has also studied introducing a law to impose a “Tobin” tax on capital inflows.

Satit said such a tax was not necessary at this stage, but it was best for the government to have an additional tool at the ready to stem the flow of capital.

Meanwhile, Pongpanu Svetarundra, director-general of the Excise Department, said he wanted to impose a tax on gambling such as government lotteries and horse racing, as well as increase the tax rate on cigarettes and alcoholic beverages.

He said the Finance Ministry should collect tax based on the retail price of cigarettes, instead of on ex-factory prices.

While this would boost the tax rate, it would also help reduce smoking and therefore protect the nation’s health, he added.

[poosmate]

Prcscct wrote

I can see it as a possible boon for the Mom and Pop type stores that do not charge VAT, as consumers may flock back to them once again and avoid the Big C type stores.

The small shops pay input vat and are unable to reclaim it so any increase will be around the same as the big stores. The small shops buying price will be higher I would think so the difference in output Vat would be small.

but has everything to do with fattening the coffers of Thai owned companies and the fortunes of their Thai owners.

Why? What has Vat got to do with profit. A large company may even have to absorb the tax increase to remain competitive.

[PeteC]

Nothing to do with VAT. It's based upon corporate tax going from around 30% to 18%. Corporations will get the benefit to the bottom line. Consumers will take the brunt of increased sales tax or VAT. The M&P's I'm familiar with don't know what VAT is. They buy, mark up and sell on.

One point though, I may be confusing some fine points about the difference between VAT and sales tax. Please let me know if there is really any distinguishable difference? Pete

[poosmate]

Yes I agree . I was only looking at Vat as that was all your post seemed to be commenting on.
I believe the lower corporate tax should enable prices to be reduced benefiting the consumer and maybe offsetting some or all of the VAT hike.
I know this is unlikely to happen with old stuck in their way Thai companies.It could however attract competitors to join the Thai market who could in effect undercut the already profitable companies here, again benefiting the consumer.

[poosmate]

Prcscct
Vat is added to every step of the chain from raw to factory to wholesaler
And ultimately the consumer.
All persons in the chain who are registered and charge VAT are able to claim the VAT back. A M&P may not know about VAT but are paying it at the wholesalers so will increase their costs.