Thai Finance Ministry To Revise Withholding Tax List Following Protests

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

27 July 2001

The Thai Finance Ministry has executed a spectacular, if temporary, U-turn over the issue of withholding taxes, it was revealed recently.

On July 16th, six new business categories were added to the country's withholding tax programme with the intention of thwarting tax evasion. The new categories added were brokerage fees, patent and copyright fees, interest charges on loans, transport and warehousing service fees, insurance premiums, and prize money from draws and competitions. The authorities believed that the move to broaden the withholding tax base would facilitate the fight against tax evasion and money laundering because more companies would be brought into the system, and the resultant paper trails would help officials auditing tax returns.

However, following massive opposition from transport firms, the Finance Ministry has announced that it will temporarily reduce the withholding tax rates on transactions. Under the July 16th measures, withholding tax ranging from 1% to 3% was to be collected at the moment of a transaction, and offset against corporate tax liability at the end of the year. However, shipping firms and freight forwarders vehemently objected to the new charges, saying that they placed an unfair burden on cashflow.

Suchart Jaovisidha, the Thai Deputy Finance Minister, said that a list of revised rates would be submitted to the cabinet next week, although he declined to comment in detail, saying only that the new measure would be a temporary one, and would not apply retroactively. However, it is expected that the Revenue Department will recommend a cut to 1% from 3% for withholding tax charged to trucking firms, with no change predicted for freight forwarders, who had also lobbied for a cut.

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