Thai finance chief cautions reform balance to prevent tax shock on economy

Krisada Chinavicharana, the permanent secretary at the Finance Ministry, sounded the alarm bell for the incoming government, stating that the proposed tax reforms aiming to bump up the revenue should not produce a shockwave effect on the economy.

Currently, tax revenue stands at just 14% of the GDP, falling short of the expected 15% or 16%, Krisada said. He stated…

“In all past government administrations, the ministry proposed tax reform plans for consideration, consisting of 20 items.”

Krisada shared his concerns, stating that even though the ministry hopes to execute the proposed tax reforms to ensure an increase in revenue – something critical to manage the expenses and navigate through the foreseeable economic uncertainties – it is pivotal that these steps do not deliver an undue blow to the economy.

He cautioned about extreme measures potentially shocking the economy and suggested reducing tax-deductible expenditures in a systematic, gradual manner. The Revenue Department, he points out, already offers numerous tax deductions, including those for retirement mutual funds, life insurance premiums, and mortgage interest. These deductions, in total, signify a significant portion of the overall tax deductions, he said.

Asserting the need to avoid excessive tax deductions, Krisada suggested enforcing a maximum cap on the total deductible amount. Under this arrangement, taxpayers could employ deductions from the provided list, so long as the sum total does not breach the stipulated cap, reported Bangkok Post.

Krisada maintained that certain tax-deductible expenses, more so the procurement of retirement mutual funds, which has long helped sustain the capital market’s stability, must be curtailed.

On the issue of the financial transaction tax, the Finance Ministry has examined a draft law aiming to impose a 0.11% tax on share sales. This was endorsed by the Cabinet during the reign of Prayut Chan-o-cha and is now being forwarded to the Council of State for further scrutiny.

Simultaneously, the Federation of Thai Capital Market Organisations has pleaded with the ministry to relinquish the collection of the transaction tax. It argues that the stock market still requires tax incentives to boost market development.

Despite these appeals, Krisada affirmed that the taxation law’s progression still falls within the ministry’s tax reformation plan.