15% VAT rate proposed

[reader]

From Pattays Mail

On December 6th, 2024, Mr. Sorathep Rojpotjanaruch, the Thai Restaurant Business Association Chairman, raised concerns about the government’s proposal to increase the VAT rate from 7% to 15%. 

He warned that the move could devastate the restaurant industry, which has already seen over 50% of businesses shut down since early 2024.

The VAT hike would disproportionately impact restaurants, as they must pay VAT on food sales but cannot deduct VAT on raw materials like fresh produce. This unique burden forces businesses to choose between shutting down or raising prices.

 

Sorathep estimated that food prices could surge by 20-25% to cover the increased costs, burdening consumers.

He urged the government to reconsider and suggested alternatives, including raising the VAT registration threshold from 1.8 million to 2.5 million baht and allowing a 25% tax deduction for agricultural raw materials, which are currently non-deductible. These measures, he said, could help SMEs remain in the system and avoid mass closures.

Additionally, Sorathep criticized comparisons to countries like those in Europe, where VAT rates exceed 20%. He argued that such comparisons are flawed, as higher living costs in those countries are offset by higher incomes. In contrast, Thailand’s proposed VAT increase is not matched by wage growth, leaving businesses and consumers to bear the brunt.

Continues at

https://thepattayanews.com/2024/12/06/restaurant-and-hotel-industries-fear-collapse-over-proposed-15-percent-vat-hike/

[bkkmfj2648]

For many months now I have been reading article after article on the many ways that this current new Thai government is trying to find ways to increase tax revenue.

In my 2 years and 4 months of living here - I have not seen such fervor by the government to do so.  Is there something awful in the background lurking for this urgency?

The only thing that I can think about is perhaps the almost 3 years of closure due to the Covid epidemic had more serious negative impact to the Thailand financial resources that the current government appears to be desperately trying to fill that financial hole ?

But the Thai baht continues to remain strong so it does not make sense all of this new urgency to increase taxes in many areas (VAT, real estate, NIT, tax us foreigners on incoming bank transfers, etc.).

thoughts ?

 

[reader]

High season drives the demand from tourists for Thai currency that props up the baht. But this reflects seasonal fluctuations in strength and weakness.

As for deeper, underlying economic issues, your suspicions may be justified. The governments (former and present) have been pulling out all the stops to boost tourism and view it as panacea to revenue.

it’s a tricky balancing act for sure.

[reader]

From The Nation

No plans to increase VAT to 15%, Paetongtarn assures citizens

Prime Minister Paetongtarn Shinawatra on Friday denied reports that the government intended to raise value-added tax (VAT) to 15%, taking to social media to address public concerns. 

She said that she had discussed the matter with Deputy Prime Minister and Finance Minister Pichai Chunhavajira, along with the PM’s policy advisory team. 

 

She reassured the public that VAT will not be increased to 15% and that the Finance Ministry was studying reform of the tax structure with a comprehensive and fair approach to reduce inequality and enhance the country's competitiveness.

Tax reform in other countries has been a gradual process, often taking more than 10 years to study and implement effectively, she posted.

The government’s primary policy is to reduce public expenditure, improve government efficiency, and create opportunities to generate new income for citizens, ultimately aiming to enhance the quality of life for all Thai people, she said.

"Rest assured, fellow citizens, that the government operates with prudence, listens to all stakeholders, and prioritises the welfare of the people to drive our nation forward for everyone," Paetongtarn concluded in the post.

https://www.nationthailand.com/blogs/news/policy/40043917

[Keithambrose]

This seems to be another example of floating a proposal, not necessarily serious, to gauge reaction then if hostile, you can deny proposal. I think some members earlier had a name for this, but I can't remember it!

[bkkmfj2648]

2 hours ago, Keithambrose said:

This seems to be another example of floating a proposal, not necessarily serious, to gauge reaction then if hostile, you can deny proposal.

Spot on Keith - the Thai government(s) {past and present} almost always use this tactic.  They propose some ideas (can be radical or not) and wait for the feedback to understand which way to go.

Unfortunately, when they put in motion the idea to tax us who make bank transfers {inbound remittances} into Thailand as Assessable Income - there was NO pushback (because we are mostly unseen and don't have a voice) - Thailand proceeded and implemented this tax change effective 01-Jan-2024.  

Now the government is thinking about another tax collection idea - which is to tax our global income - income that we make outside of Thailand.  Again, there seems to be NO pushback - as those mostly impacted don't seem to have a voice = non Thai citizens and some wealthy Thai citizens who have big assets outside of Thailand and prefer to remain silent due to potential exposure about said assets that create income that are out of Thailand.

So, let us see what comes our way in 2025 🤔

[vinapu]

20 hours ago, reader said:

 

The VAT hike would disproportionately impact restaurants, as they must pay VAT on food sales but cannot deduct VAT on raw materials like fresh produce. This unique burden forces businesses to choose between shutting down or raising prices.

 

not taking any side in discussion about the above I'd like to notice that this is exactly what VAT= Value Added Tax is all about. Restaurant buys untaxed raw materials and converts them to more or less edible goods it can sell for markup. Thus potato bought for 4 satangs is being converted to 25 baht fistful of French fries and this is taxed.

Generally taxes like VAT are regressive as amount is the same whether paid by poor street sweeper or rich Western pensioner.  Of course rich people pay more because they consume more expensive goods.

For governments advantage of taxes like VAT over income tax is easiness to control compliance and collect it. 

[reader]

18 hours ago, Keithambrose said:

This seems to be another example of floating a proposal, not necessarily serious, to gauge reaction then if hostile, you can deny proposal. I think some members earlier had a name for this, but I can't remember it!

“Run it up the flagpole”