Contemplation of Value-Added Tax for Companies with Lower Income
Floating a Controversial Idea: Pichai Proposes Expanding VAT to Boost State Income
In a move that's raising eyebrows among Small and Medium Enterprises (SMEs), Finance Minister Pichai Chunhavajira suggested on Thursday that the government collect Value-Added Tax (VAT) from businesses earning an annual income below 1.8 million baht. The minister's proposal aims to boost state income and reduce the country's budget deficits.
Currently, businesses with incomes surpassing the aforementioned amount are required to pay VAT, in addition to other taxes. The minister's idea involves the introduction of a "VAT Category 2" similar to some European countries, where businesses with annual earnings of 1.5 million baht would pay a 1% VAT, generating an estimated 200 billion baht in revenue.
Small businesses have expressed concerns about this proposal, fearing it would drastically increase their financial pressure and operational challenges. SMEs are already grappling with a tough economic environment marked by sluggish growth, fierce competition, and increased costs due to imports. Introducing VAT to smaller businesses could potentially worsen these challenges, further straining their profitability.
The Federation of Thai SMEs and business leaders have criticized this move, arguing that the introduction of new VAT categories or lowering the registration threshold would unfairly burden small businesses. Instead, they advocate for raising the VAT threshold, rather than lowering it.
In a bid to alleviate some of the financial pressure on SMEs, experts suggest offering incentives for businesses to voluntarily register for VAT, such as government support for shop improvements or software systems to ease compliance.
As part of the government's efforts to boost the economy, Pichai also discussed resolving household debt, which is estimated at 16.4 trillion baht, with 1.2 trillion baht classified as non-performing loans affecting about 5.4 million debtors. The minister plans to clear debts below 100,000 baht for 3 million of these debtors within three months. For those with debts exceeding 100,000 baht, the ministry plans to collaborate with financial institutions to restructure the debt, while providing soft loans to support debtors.
Moreover, Pichai mentioned the government's objective of raising income for the country's 28 million farmers by improving efficiency in rice production. He proposed reducing rice cultivation areas by 15 million rai, a move expected to drive up market prices.
As the debate over the VAT expansion unfolds, it is crucial to consider the potential impacts on small businesses and the broader economy. While the government aims to reduce the budget deficit and invest in public projects, it must acknowledge the concerns of SMEs, who play a significant role in the Thai economy, and explore alternative revenue generation strategies to avoid unintended consequences on these businesses.
- Despite the controversy, Pichai's proposal to expand VAT might have implications for the financing of businesses, particularly SMEs, as the introduction of a "VAT Category 2" could potentially increase their financial pressure and operational challenges.
- In the context of Pichai's plan to boost state income, it's essential to investigate the potential impact of VAT expansion on businesses, especially SMEs, to ensure a balanced approach that avoids causing undue financial strain while addressing budget deficits and stimulating the economy.
