Discussion on Imposing Value-Added Tax (VAT) for Lower-Revenue Companies
Revised Article:
Thailand's Finance Minister, Pichai Chunhavajira, has sparked debate by suggesting the introduction of "VAT Category 2" for businesses with an annual income below 1.8 million baht. This move aims to increase state income and lower budget deficits.
At present, businesses with an income of 1.8 million baht or higher are required to pay Value-Added Tax (VAT) in addition to other taxes. However, under "VAT Category 2," businesses earning as little as 1.5 million baht yearly would pay a minimal 1% VAT. If implemented, this could generate an extra 200 billion baht in revenue.
Young entrepreneurs often underreport their income to evade VAT obligations and pay only personal income tax, according to Mr. Pichai. With VAT Collection expansion, the government could potentially reduce the budget deficit from the current 4.4% to 3.5% of GDP, with the additional revenue invested in projects.
However, enforcing VAT on smaller businesses could strain their finances. Given Thailand's large informal sector (estimated between 45-50% of the economy), compliance could prove challenging, potentially pushing some businesses further underground to avoid taxation.
For firms making 1.5 million baht a year, deducting expenses at 60% leaves the remaining amount subject to personal income tax. With VAT, the tax burden increases.
To address household debt (16.4 trillion baht) and improve farmers' income, Mr. Pichai has plans. About 3 million of the 5.4 million debtors owe less than 100,000 baht, and the Ministry aims to clear their debts within three months. For debts exceeding 100,000 baht, financial institutions will be asked to restructure the debt, while the ministry will provide soft loans to support them.
The government also wants to improve rice production efficiency to raise income for farmers. The goal is to reduce rice cultivation areas by 15 million rai, which could help increase market prices.
- Entrepreneurs earning 1.5 million baht annually may face a higher tax burden due to the addition of VAT, as stated by Finance Minister Pichai Chunhavajira.
- If VAT Category 2 is implemented as proposed, it could potentially generate an extra 200 billion baht in revenue, which entrepreneurs or business owners would be contributing to, according to the revised article.
- Pichai Chunhavajira, the Finance Minister of Thailand, also has plans to tackle household debt and improve farmers' income, which includes a focus on reducing the debt of approximately 3 million debtors who owe less than 100,000 baht.
