Government urged to cut VAT to stimulate economy
Government urged to cut VAT to stimulate economy
BANGKOK: — The government should reduce its value-added tax (VAT) to 4 per cent from the 7 per cent at present as part of measures to stimulate the country’s economy, according to a top financier.
Supavut Saichue, president of Phatra Securities Plc, said since the economy had expanded at a slower pace and budget disbursement have been delayed, he wanted advised the government to come up with three more measures to jump start the economy.
The first recommendation is to cut the VAT by 3 per cent to 4 per cent for one year, which he believed could stimulate consumption and boost entrepreneurs’ confidence that their products could be sold upon distribution.
The measure is considered more effective than the proposed personal and corporate tax cut, which would make the government lose around Bt80-90 billion in revenue.
He believed the measure would produce fruitful results and could prevent corruption.
The second measure is to propose to the Bank of Thailand’s Monetary Policy Committee to cut the policy interest rate by 1.50 per cent from 3.75 per cent to show the government’s sincerity in stimulating local investment amid the current foreign investment slowdown.
Third is to guarantee the small- and medium-size enterprise (SME) loans since the business runs a high risk and involves a lot of workers. The state guarantee would help boost confidence among SMEs that they could apply for loans.
On the local political situation, Dr. Supavud conceded it would drag on for a few years.
He said Phatra projected the country’s economy would grow 3.3 per cent next year should the political disorder continue unabated.
BoT concerned about increased unemployment
BANGKOK: — Around 900,000 people will be unemployed if the Thai economy grows only 2-2.5 per cent next year, according to the Bank of Thailand.
BoT deputy governor Atchana Waiquamdee said the central bank would revise its economic growth estimate for 2009 made in September that it would expand by some 3.8-5 per cent after many think tanks decreased their forecasts based on concerns about growing negative factors.
Of late, the National Economic and Social Development Board (NESDB) had decreased its economic expansion forecast for next year to 3-4 per cent.
Regarding a proposed value-added tax (VAT) cut, Mrs. Atchana viewed it as one of the most effective measures, but might be difficult to be put into practice.
The measure, if implemented, would be seen an effort by the government to reap political popularity.
Should the VAT be cut as proposed, she said, it will be hard to increase the tax again later because the government would be afraid of losing popularity.
Regarding the proposed policy interest cut, she said it is up to the Monetary Policy Committee’s decision.
Mrs. Atchana said she supported the proposed state guarantee on small- and medium-size enterprise (SME) loans.
However, she cautioned that loan accounts must be clearly separated and strictly examined to prevent an “unscathed” collapse by business owners.