Thailand to explore new tax system for ageing population

Thailand must urgently adjust its tax structure and increase tax participation to address future expenses related to its ageing population, according to Deputy Finance Minister Julapun Amornvivat. The Finance Ministry is exploring a negative income tax (NIT) system to assist individuals with incomes below a government-set threshold.

Julapun clarified that the goal is to ensure residents can sustain their livelihoods, not to reduce state welfare expenditures. He emphasised that long-term welfare assistance needs to be assessed to manage the budget burden, especially as Thailand has been classified as an aged society.

In 2005, Thailand became an ageing society, with people aged 60 and older exceeding 10% of the population. By 2023, this segment accounted for 20% of the population, or 13 million people, according to the Department of Older Persons.

Julapun stated that the NIT concept is in the preliminary study phase and could take one to three years to implement. The Fiscal Policy Office (FPO) conducted studies on NIT several years ago, but the international framework for NIT has since evolved.

“The initial principle of NIT was to offer assistance to those who had previously paid taxes to the state. For instance, if an individual worked and paid taxes, then became unemployed, the government would provide financial assistance to this individual.”

Julapun noted that the definition of NIT has shifted towards a welfare provision model for low-income individuals who often do not fall within the tax system. Meetings are scheduled with the FPO and Revenue Department to discuss progress on the study phase.

Ageing population

“The first step to establish an NIT system is to bring everyone into the tax system, regardless of whether they fall under the taxable income threshold.”

Julapun highlighted the need for the government to establish an income measurement to set a threshold level, with a mechanism for tax refunds to assist them. If the NIT system is implemented, revenue laws regarding the requirement for individuals earning income to submit a personal income tax return (PND 91 form) may need to be amended.

Currently, everyone earning 120,000 baht (US$3,600) per year is required to file a PND 91 form. A review would be needed to determine whether the income threshold should be reduced.

Julapun mentioned that the study should consider whether the NIT should be implemented and examine which mechanisms it would replace. If the NIT can substitute for various types of welfare, officials need to determine whether to discontinue the state welfare card programme to avoid redundancy, reported Bangkok Post.

“The government must later establish an income measurement to set a threshold level, with a mechanism for tax refunds to assist them.”

He concluded by stating that collaborative studies may reach a conclusion, which would be forwarded to the cabinet for further consideration.