Thailand will lower its VAT from October… before increasing it in 2015

Posted on July 22, 2014


Thailand’s military junta announced to lower the VAT from September before increasing it by two percent points from October 2015. After telling to fight populist economic measures such as the ones implemented by the previous government, the temptation is now too big not to do the same.

When coming in power two months ago, Thai military vowed to get rid of populist measures which have only an short-term placebo effect but put long term finances for the Kingdom at stake. The National Council for Peace and Order agenda is now to change the tax system. While experts mull out equations which could at the same time generate new sources of revenues and soften a possible impact on low income Thais – in fact the majority of the people in the country. No reform is likely to come out before the nomination of a military-backed government. Any increase in taxes will be difficult to implement as populist policies have been the mark of any Thai governments in the past.

However, there is one measure which seems to have been already confirmed by the junta: the lowering of the value-added tax (VAT) from its current rate of 7% to 6.4% starting October 1st, 2014. The Military hopes then to reign a little bit into inflating prices which have seen costs rising sharply over the last five years and penalize small income earners. But also please tourists coming to the Kingdom.

However, it will only be a one-year relief. The Junta indicated that it wants to see the VAT rising by two percent points to 9% from October 2015. Lots of experts suggested already to rise VAT in Thailand to 10% to generate new sources of revenues to finance large infrastructure projects.

The Bangkok Post reported that a source at the Ministry of Finance explained that ending populist policies totally would be a hard task due to the large inequality gap between rich and poor in the Kingdom. The VAT new rate from October is just an example…

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