Thai Finance Minister Won't Cut VAT

by Mary Swire, Tax-News,com, Hong Kong

29 July 2008

Thailand's Finance Minister Surapong Suebwonglee on Monday revealed that the government will not be acting on proposals put forward by the Commerce Ministry to reduce the VAT rate from 7% to 3%, in order to counter the impact of increased living costs.

Despite reducing several taxes in order to assist the Thai population cope with rising costs, Dr Surapong, who is also the country's Deputy Prime Minister, suggested that a VAT cut would be a step too far, and would be likely to deplete government revenues to the point where "not enough state revenues would be generated to pay fiscal budgets".

According to a report in The Nation newspaper, the Finance Minister explained that:

"VAT is a major source of revenue. For two years, we have delayed the increase in VAT to 10 per cent and instead focused on boosting the economy through higher tax deduction allowances, higher depreciation costs, and a cut in special business tax for the property sector."

"Inclusive of the six recently-endorsed measures, we have lost a large amount of revenue and there is no need to enact a tax measure to control product prices. Indeed, the lower fuel excise taxes should reduce costs and allow manufacturers to hold on the planned price increases."

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