Finance Minister Pichai Chunhavajira has proposed a shift in Thailand’s tax strategy to bolster state revenue and enhance the nation’s economic standing. The plan includes raising the value-added tax (VAT) while reducing corporate and personal income tax rates. This approach aims to drive national development, increase competitiveness, and address domestic disparities.
The Organisation for Economic Co-operation and Development recently set guidelines, requiring businesses to pay a minimum of 15% in corporate income tax. Thailand’s current rate stands at 20%, but there is a push to lower it to 15% to stay competitive on a global scale. Speaking at the Sustainability Forum 2025, Pichai emphasised the necessity of this adjustment.
Pichai also noted the global competition for skilled workers, pointing out that many countries have lowered their personal income tax rates to attract talent. In contrast, Thailand’s top earners face a maximum rate of 35%.
Discussing potential reforms, ministry officials have considered introducing a flat 15% personal income tax rate to draw skilled professionals from abroad. However, Pichai highlighted that while the personal income tax base is low, the consumption tax base remains high, requiring recalibration.
Currently, Thailand’s VAT rate is 7%, with legal provisions to increase it to 10%. Despite this, the rate has remained unchanged for years. Pichai pointed out that many countries impose VAT rates ranging from 15 to 25%, suggesting that an increase in Thailand could be advantageous.
“Consumption taxes are considered a sensitive issue. However, if we increase the rate in a reasonable and appropriate manner, it could serve as a tool to help low-income individuals. The gap between rich and poor would narrow because we would collect taxes based on the same base for everyone.”
VAT hike
Pichai also addressed the need for monetary policy to support the private sector and reduce costs for residents. Fiscal policy, he argued, should focus on increasing revenue to mitigate social inequality and stimulate economic growth. He noted that global changes, such as climate change and geopolitical tensions, present an opportune moment for domestic investment.
“Thailand is attracting interest from investors, particularly from the US and China, because of its comprehensive potential, strategic location, and significant size compared with other Asian nations, as well as an appropriately sized population. These factors also position Thailand well to support investment in green energy.”
Investment in Thailand has waned significantly over the past two decades, falling to around 20% of GDP from nearly 40% during economic booms. However, interest is gradually increasing, especially in sustainability-focused sectors like green energy.
In the past nine months alone, projects approved by the Board of Investment have reached a value of approximately 700 billion baht (US$20.4 billion), with expectations to hit 1 trillion baht (US$29 billion) by year’s end—the highest in decades.
Pichai underlined the government’s commitment to structural reforms, including monetary policy that encourages investment by maintaining low interest rates. Although concerns about inflation arise from such policies, he projected inflation rates for this year to remain below 1%, creating an opportunity for the Bank of Thailand to cut interest rates further.
In October, the central bank unexpectedly reduced its key interest rate by a quarter point to 2.25%. However, further cuts are unlikely at the upcoming meeting in December.
Weak currency
Pichai also discussed the challenge of weakening the baht, a task complicated by the high level of confidence in the country that attracts US dollar inflows. He suggested strategies such as transferring international reserves to other accounts, though he acknowledged that weakening the baht requires long-term measures.
On fiscal policy, Pichai argued for government support of growth, even at the cost of increased public debt. Thailand’s public debt has risen from US$4.8 trillion nine years ago to US$12 trillion today.
However, he emphasised that debt levels are less concerning than the country’s ability to repay, which economic growth can facilitate. Over the past two years, the budget deficit has averaged over 4% of GDP, which is higher than desired.
Ideally, the deficit should be around 3.2%, but for a growing economy, a deficit of up to 3.75% is acceptable, he noted. If GDP growth reaches 4 to 5%, the deficit could rise to 4.2%. The government aims to foster GDP growth, with both monetary and fiscal policies aligned to this goal, reported Bangkok Post.
Additionally, Pichai stressed the importance of increasing national savings, given Thailand’s ageing population. While there are savings from social security and provident funds, he warned that these could deplete rapidly upon retirement, posing a potential future risk.
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