VAT’s next? Thailand mulls talks amid dismissals over potential increase
The Thai administration yesterday dismissed the possibility of increasing the value–added tax (VAT) from 7% to 10%. Despite this official stance, talks have been initiated around this proposal, attributing the potential increment to the requirement for additional funding to cater to the escalating needs of the country’s ageing populace.
From the Office of Fiscal Economy, Pornchai Thiravej, the director, shed light on a proposal put forth by the National Economic and Social Development Council. This proposal advocates for an increase in the VAT rate as it could serve as a steady source of funds to address the financial necessities of the retirement community.
The proposition’s basis is the allocation of the extra 3% points, resulting from the VAT increase, towards the financial assistance of senior citizens. However, despite these discussions, the Thai Ministry of Finance has refrained from establishing any definitive policy aiming to heighten the VAT, as per the ministry’s statement.
Nevertheless, the council’s analysis accentuates the imminent demographic challenges that Thailand is poised to face. At present, approximately 13.5 million senior citizens reside in the nation, making up nearly 20% of the aggregate population.
Predictions suggest that this figure could escalate to over 18 million within the next ten years, making up more than 28% of the total population. Moreover, by 2040, studies project that Thailand will witness an elderly population of 20.51 million, equivalent to approximately 31.37% of the total populace or a third of the population, reported Pattaya News.
According to Pornchai, a considerable fraction of Thailand’s elderly populace is grappling with financial hardships. A considerable number of these individuals struggle to cover essential expenses as their income falls below the poverty line. Remarkably, surveys have indicated that nearly 34% of Thai individuals continue to work post-retirement. Among these, an alarming 80% earn less than 100,000 baht per annum, highlighting their dependence on additional income sources to fulfil basic living expenses.
Current income sources for elderly Thais encompass work (32.4%), financial support from their children (32.2%), and pensions (19.2%). Furthermore, more than 41.4% of senior citizens have savings amounting to less than 50,000 baht.
In Thailand, only government employees are entitled to the government’s pension benefits, which constitute a minimum of 40% of their monthly income. However, for the majority of Thai citizens who contribute to retirement savings schemes such as social security or the National Savings Fund, these funds often fall short of maintaining their standard of living post-retirement.
Pornchai said that while the proposal to increase the VAT rate might face public resistance, he believes that with proper explanation, it could find acceptance among the populace.
As Thailand grapples with the impending demographic shift, finding sustainable solutions to support its growing elderly population remains a crucial endeavour.”
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