Thailand must reform its entire tax system, as both personal and corporate income tax rates remain higher than international standards, according to Finance Minister Pichai Chunhavajira.
Speaking at the ACMA Business Forum 2024 on the theme “Shaping Tomorrow,” Mr. Pichai highlighted that Thailand’s personal and corporate income tax rates are relatively high compared to its competitors. He noted that these tax rates are currently being reduced, with a trend toward aligning them with international benchmarks.
Regarding value-added tax (VAT), he mentioned that countries around the world have studied this issue, and Thailand has also conducted periodic assessments.
“VAT is linked to consumption; those who consume more will pay more tax than those who consume less. We cannot impose higher VAT on specific groups; it must be collected uniformly. However, a portion of VAT revenue could be allocated to assist low-income individuals,” he stated.
Mr. Pichai also addressed the need for policies to manage debt issues, indicating that the Finance Ministry will expedite efforts to assist individuals in restructuring debt, particularly those arising from home and vehicle purchases.
He acknowledged that restructuring such debt is challenging but emphasized that helping individuals survive financially will ultimately lead them back as customers to commercial banks.
While he noted that financial institutions are currently robust, allowing an increase in defaults could weaken them in the long run.
According to Mr. Pichai, financial institutions have already allocated reserves for non-performing loans or have written off related expenses, yet they continue to record high profits. He believes that helping clients resolve their financial debts could lead to reduced costs for banks.
In a related note, Mr. Pichai reflected on Thailand’s economic history, stating that the country was once an emerging market between 1980 and 1985, with annual GDP growth rates reaching 9-10%, partly due to a low starting point.
During that time, national investments surged, with the investment ratio accounting for 40-50% of GDP, compared to the current ratio of 19-20%. This decline has contributed to sluggish economic growth in recent years, with an average growth rate of 0% over the past five years. Excluding the COVID-19 pandemic years (2020-2021), Thailand’s economy has only grown by an average of 1.9%, despite having the potential for a growth rate of 3.5%. He warned that if no action is taken, the country’s growth potential may diminish.
Mr. Pichai also commented on the exchange rate, stating that the baht’s value impacts export revenue, which constitutes approximately 65% of GDP, but suggested that it should be allowed to follow market mechanisms.
Regarding current trends in the stock market, which has shown an upward trajectory, he attributed this to public confidence in the government, which has established itself quickly with clear policies that address citizens’ concerns. Adjustments to investment regulations, such as those concerning short selling, have also boosted investor confidence, along with positive responses to government-supportive initiatives like the Vayupak Fund. Additionally, the decline of tech stocks in foreign markets and falling interest rates have influenced the capital market.
“The trading volume on the Thai stock market once reached 80 billion baht. Maintaining a range of 60 billion to 80 billion baht is feasible, but we need to foster confidence in the economy,” he concluded.
