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Thailand Pulls VAT Hike Plan

by Mary Swire,, Hong Kong

04 December 2014

Thailand's Government has backed away from its plans to raise the value-added tax rate late next year, after lawmakers sided with business leaders who said the economy is too fragile.

The Government had said that increased spending was required to boost the economy's prospects, while acknowledging that this would lead to an increased budget deficit in 2015. To counteract higher spending, the Government had proposed raising the value-added tax rate by one percent.

Thailand's headline value-added tax rate is, in theory, ten percent. However, a seven percent rate has been in force since 1999. This seven percent rate was extended again in July this year, until at least September 2015, on account of civil unrest in the nation and a slowing economy.

Thai media outlets took the Government's announcement to mean that the rate would be increased on top of the introduction of the ten percent rate from late next year. Instead, it is thought likely that the Government had instead intended to raise the rate to eight percent, while extending the waiver from payment of the ten percent rate, as it has done for more than a decade.

Nevertheless, the Government's plans were quickly retracted, with businesses arguing that the Government should wait until 2016, when the economy is expected to exit a period of stagnant growth and instead post stronger growth rates nearing four percent of gross domestic product.

TAGS: VAT rates | tax | business | value added tax (VAT) | law | budget | Thailand

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