Sharp corporate tax cut considered

http://www.nationmultimedia.com/2010...-30142519.html

Sharp corporate tax cut considered

By Business Desk
The Nation
Published on November 18, 2010

VAT rise would make up for lost revenue; officials to put package to Korn in new year

Finance Ministry officials are tweaking a package of tax reforms, with the likelihood that the corporate-income-tax rate will be cut aggressively from 30 per cent to 18 per cent in return for an increase in value-added tax.

Satit Rungkasiri, director-general of the Revenue Department, said at a seminar yesterday hosted by Siam Rath that the proposed reform package would be presented to Finance Minister Korn Chatikavanij early next year.

One proposal is to increase VAT from the current rate of 7 per cent, he said, adding that every percentage-point VAT increase would increase government revenue by Bt60 billion.

Corporate and personal income tax would be reduced, with every percentage-point cut slashing revenue by Bt6 billion.

Satit said corporate income tax might be cut to 18 per cent from the current 30 per cent, while the highest progressive rate of personal income tax would be lowered to 25 per cent from 37 per cent.

Local and foreign corporations have complained that Thailand’s corporate tax rate is too high when compared with those in other countries in the region. Many business leaders have therefore proposed a cut to make the Kingdom more attractive to foreign companies.

Thailand recently advertised itself as a destination for the regional headquarters of multinational firms, but only a few have submitted proposals so far. Under that package, expatriates working for a regional HQ are also subject to lower individual income tax.

According to KPMG’s 2010 tax survey, global average corporate income tax stands at 24.99 per cent. However, in Southeast Asia, the rates of Thailand and the Philippines are the highest at 30 per cent, compared with the 17 per cent imposed by Singapore.

Satit also said there was an option partially to remove tax privileges granted by the Board of Investment. The ministry could even completely abandon the BoI’s tax incentives.

At present, to attract new investment, the BOI extends the maximum eight-year corporate-income-tax exemption on approved investment projects. Some tax privileges also cover the import of machinery.

The ministry has also studied introducing a law to impose a “Tobin” tax on capital inflows.

Satit said such a tax was not necessary at this stage, but it was best for the government to have an additional tool at the ready to stem the flow of capital.

Meanwhile, Pongpanu Svetarundra, director-general of the Excise Department, said he wanted to impose a tax on gambling such as government lotteries and horse racing, as well as increase the tax rate on cigarettes and alcoholic beverages.

He said the Finance Ministry should collect tax based on the retail price of cigarettes, instead of on ex-factory prices.

While this would boost the tax rate, it would also help reduce smoking and therefore protect the nation’s health, he added.

What everyone knows but nobody admits is that many companies in Thailand bribe the tax officials to accept absurdly low amounts, or even nothing, in corporate taxes.

In theory VAT is easier to collect.

...until the self same companies simply underdeclare takings and pocket the VAT anyway. At least they won't need to bribe the officials anymore.