Tax code revamp seen as necessary
Loopholes must be plugged, says chief

Thailand’s tax code must be overhauled to close existing loopholes and ensure fair treatment for all citizens, according to Sanit Rangnoi, the director-general of the Revenue Department. The department is co-operating with Chulalongkorn University to conduct a sweeping review of the tax code with input from private bodies such as the Federation of Thai Industries, the Thai Chamber of Commerce and the Federation of Accounting Professions.

”Overhauling the tax code isn’t easy, since changing one area affects other areas as well,” Mr Sanit said.

”As a result, to date no one has ever wanted to look at the basic structure of the tax code.”

Changes over the years in line with different government policies as a result have added to its complexity.

Mr Sanit added that tax officials themselves were often loathe to offer interpretations of the tax code for fear of criminal liability.

The legal review, he said, aimed to simplify the tax code for the public and tax officials alike to help save costs and improve efficiency in compliance.

Contradictory or outdated elements of the tax code and associated ministerial announcements will also be eliminated, with the basic principles of the law streamlined and regrouped.

Certain areas will also be modernised to reflect current society values. For instance, the current rule stating that a woman’s revenues must be treated as that of the husband will be eliminated. The law will also be updated to reflect today’s economy, such as in the treatment of electronic transactions and e-commerce.

Mr Sanit said procedures for amending the tax code will also be changed to allow more flexibility to the government. Amendments must currently be ratified by Parliament.

He said tax rates also would be re-examined. Customs tariffs have fallen sharply in recent years due to trade liberalisation, even as personal income tax revenues remain relatively low.

Although personal income tax rates have a maximum of 37%, average rates are just 5%. Value-added tax rates, meanwhile, have been frozen at 7% for 10 years although the law stipulates 10%.

Tithiphan Chuerboonchai, dean of the Faculty of Law at Chulalongkorn University, said the project was split into two phases.

The first phase, to be completed by February, was aimed at streamlining the various classifications of the tax code.

The second phase would focus on scrutinising different principles of the law, such as the why married couples should be treated as a single entity for tax purposes and required to file a joint return, or why transactions on the Stock Exchange of Thailand should be exempt from capital gains tax.

Mr Tithiphan said the second phase was expected to be completed in May or June, adding that economists would be asked to offer their opinions on the impact of various changes to the law.

He said issues such as the treatment of women under the tax code would be examined with the intention of ensuring fairness for all taxpayers.

Currently, income earned by a woman outside of regular income, such as commission revenues, must be consolidated with that of her husband for tax purposes. This in turn results in the couple incurring higher tax charges than if they filed separately, leading to the law serving as a financial disincentive for couples to register their marriages.

FTI chairman Santi Vilassakdanont suggested that tax issues should be taught in local schools to help reinforce the importance of paying taxes as part of one’s civic duties. Small and medium-sized companies, who account for 80% of all firms, should also be encouraged to enter the tax system, he said.

Sphere: Related Content

If you enjoyed this post, make sure you subscribe to my RSS feed!