Contemplating Value-Added Tax Imposition for Companies with Lower Income Streams
Financial whiz, Pichai Chunhavajira, shakes up the economic landscape on Thursday with a radical proposal: slapping a Value-Added Tax (VAT) on businesses bearing incomes under 1.8 million baht. Currently, only businesses raking in the big bucks above that figure are hit with VAT alongside other taxes. This "VAT Category 2" is something Europe's seen before, and if businesses earning 1.5 million baht cough up 1% VAT, it'd bring an extra 200 billion baht to the government coffers.
Why's Pichai pushing this agenda? Well, it's all about plugging those budget holes. See, young hustlers are hip to the VAT-avoidance game, declaring incomes below the 1.8-million-baht threshold to evade VAT and stick with personal income tax. A business grossing 1.5 million baht can expense-dodge by 60%, leaving a tiny 10,000 baht annual tax bill. Boosting the VAT base means greener finances, with the deficit plummeting from 4.4% to 3.5% of GDP. The added revenues could be a lifesaver, bankrolling some investment projects.
With civil servant salaries as fixed as granite, cutting costs is a struggle. So, new revenue sources are the name of the game. Presently, the government's tax haul amounts to only 15.5% of GDP, whereas it peaked at 17%.
Turning our attention to the punters, Pichai suggests a solution to the 16.4-trillion-baht national debt: axing the 5.4 million debtors with non-performing loans (NPLs). About 3 million of these debtors aren't heavyweights, owing just a hundred grand or less, and the ministry's aiming to settle these small debts within three months. For the hefty NPLs exceeding 100,000 baht, the government plans to work with financial institutions to restructure the debts, and the ministry will offer soft loans for support.
Lastly, Pichai unveils the government's grand scheme to fatten farmers' wallets: byoptimizing rice production efficiency, they hope to trim down 15 million rai of rice cultivation areas, leading to a rice supply squeeze, boosting prices.
Entrepreneurs, who currently avoid Value-Added Tax (VAT) by declaring incomes below the 1.8-million-baht threshold, may find it difficult to do so if Pichai Chunhavajira's proposal is accepted, as he seeks to expand the VAT base to include businesses earning 1.5 million baht, increasing government revenue by an estimated 200 billion baht.
To address the government's deficit, which is currently 4.4% of GDP, Pichai also proposes settling small non-performing loans (NPLs) within three months and restructuring larger NPLs in partnership with financial institutions.
Farmers may experience increased income due to Pichai's plan to optimize rice production efficiency, potentially reducing 15 million rai of rice cultivation areas, leading to a supply squeeze and higher rice prices.
