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Income Taxes May Decrease While VAT Increases

Income Taxes May Decrease While VAT Increases

Global trends are leaning towards decreasing income taxes while increasing consumption and wealth taxes, according to Finance Permanent Secretary Lavaron Sangsnit.

During a recent lecture to students at the National Defence College, Mr. Lavaron stated that if the value-added tax (VAT) is raised in the future, it will be implemented gradually, accompanied by strategies to alleviate the tax burden.

“Many countries have adopted strategies to mitigate impacts. When taxes rise in one sector, compensatory measures can assist vulnerable populations, aiming to lessen the effects of increased consumption taxes,” he explained.

When asked if an increase in VAT would suffice for tax structure reform, Mr. Lavaron responded negatively, emphasizing that a primary goal of taxation is to reduce income inequality between high-income and low-income earners, necessitating the introduction of a wealth tax. Historically, implementing such a tax has been difficult due to the wealthy’s ability to manage assets globally. Previously, tax focus was limited to assets within Thailand, which were easier to monitor. However, the wealthy often invest internationally, making tracking assets abroad challenging.

Thailand has recently joined the international tax information exchange network, allowing the Thai Revenue Department to access income data of Thai nationals residing abroad. Through this agreement, tax authorities globally exchange income information; for example, foreign revenue departments are required to report the income of Thai citizens to the Thai Revenue Department, and reciprocally.

As a result, income and assets held overseas are now visible, potentially enabling taxation of previously untaxed income.

Mr. Lavaron indicated that a wealth tax is now a feasible prospect in light of a new tax structure where income tax rates may decrease to foster investment and attract high-caliber individuals to work in Thailand.

He suggested that concurrently increasing consumption and wealth taxes could improve the efficiency of tax collection.

“We must recognize that global tax regulations have evolved, and Thailand cannot function in isolation. I believe that a well-balanced tax reform in the future is achievable,” Mr. Lavaron stated.

Previously, the Fiscal Policy Office recommended tax structure reform aimed at generating government revenue, enhancing debt repayment capacity, and addressing declining government income resulting from changes in economic structures and consumer behavior. This proposal included a review of various tax exemptions and deductions, as well as initiatives to reduce energy-related living costs, ensuring they are both necessary and beneficial.

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