Prime Paetongtarn Shinawatra has abandoned plans to increase the value-added tax (VAT) following significant public opposition after her finance minister proposed the controversial hike. “No VAT adjustment to 15%,” Ms. Paetongtarn conveyed on X, previously known as Twitter, on Friday.
This decision came after a discussion with Finance Minister Pichai Chunhavajira and her advisory team at Government House. The government encountered heavy criticism after Mr. Pichai suggested on Tuesday that VAT might rise from its current rate of 7% to 15%. Ms. Paetongtarn herself expressed discomfort with the idea, acknowledging the potential negative impact on the public.
The Prime Minister noted that the Finance Ministry continues to review tax structural reforms aimed at addressing social inequality and enhancing competitiveness; however, she did not elaborate on those plans.
Since 1992, VAT has remained at 7%, and various administrations have considered increasing it to a maximum of 10%. Moreover, the finance minister has indicated support for reducing the corporate income tax from 20% to 15% to better compete with other nations, as well as lowering the personal income tax rate from 35% to attract skilled workers amid intense global competition.
People’s Party MP Sirikanya Tansakun expressed her lack of surprise regarding the VAT reversal on her X account, emphasizing the uncertainty surrounding other tax issues, including personal income and capital gains taxes. She suggested that Mr. Pichai should hold a press conference to clearly communicate plans for tax system reforms beneficial to the public.
The United Thai Nation party, which is military-backed and part of the ruling coalition, also opposed the VAT increase, warning it would lead to higher prices for goods and services, adversely affecting the poor.
Thailand’s tax-to-GDP ratio has remained relatively steady at around 17% since 2007, which is below the Asia and Pacific average of 19% and well below the 34% average for OECD member countries, as noted by the organization. In 2022, VAT constituted approximately 25% of Thailand’s total tax revenue, according to OECD estimates. In contrast, neighboring Indonesia is set to raise VAT from 11% to 12% starting next year.
