Thailand is fully
capable of financing the large debt that will arise from its plan to spend 2
trillion baht (US$6.8 billion) on infrastructure projects, thanks to the
buoyant economic outlook and recent tax-restructuring efforts, the chief of the
Finance Ministry's Fiscal Policy Office (FPO) has said.
Responding to criticism of the government's plan to
borrow 2 trillion baht to fund infrastructure projects, which last week won
House approval, FPO director-general Somchai Sujjapongse said last week that
government revenue is set to rise in light of new investment.
Opposition MPs criticised the government for incurring
massing debts for the country. Including interest, the total debt burden from
the investment would be 5 trillion baht.
According to Somchai, the FPO estimated that the
investment in infrastructure projects in the next seven years would add another
1 percentage point per annum to the expected average gross domestic product
growth of 4.5 per cent in the coming years. This extra growth will generate
additional government revenue of 40 billion baht per year.
However, the revenue increase would not occur unless
there was investment in these projects. The faster the investment, the sooner
the pay-off, he said.
Another factor that will boost the country's revenue
is the recent reduction of corporate tax to 20 per cent, which has enhanced the
competitiveness of Thai companies, boosting their profit and enabling them to
expand.
The lower corporate income tax will draw in massive
foreign investment, which will further broaden the country's corporate income
tax base, Somchai said. Despite the tax reduction, it is hoped that in the
medium and long term, the revenue from corporate income tax would not fall but
increase, he added.
He cited a Revenue Department report that corporate
income tax revenue had in fact expanded, indicating that Thai companies have
made more investments.
Domestic consumption has continued to grow. Though the
value-added tax (VAT) rate has been maintained at 7 per cent, VAT revenue would
increase, thanks to continued high domestic consumption. Part of this revenue
would be used as government expenditure and the rest for paying debt of the 2
trillion baht borrowing.
It is estimated that the government will incur total
debt 5 trillion baht, of which 2 trillion baht is principal and the rest interest.
It has a plan to completely service the total debt within 50 years.
Somchai said it was certain that at some point the
government would raise the VAT rate. The rate would not remain at 7 per cent
over the next seven years, but the precise rate hike would depend on the
economic situation and whether the government needs to use VAT income as its
main revenue. When the economic situation picks up, people would be ready to
afford a higher VAT rate. A rise in the VAT rate by 1 percentage point would generate
additional income for the government of 50 billion baht per year.
"The appropriate time to raise VAT is whenever
the country achieves a balanced budget or low budget deficit, as in that time
people are expected to be able to accept it. We'll raise the rate by just a
little, such as 1 per cent, to generate revenue for economic development and
for paying down debt," he added.
He said the excise tax is one of the government's
primary sources of income. If the government raised the diesel excise tax, it
could gain additional revenue of 100 billion baht per year. The government
would take that step when economic conditions were favourable, Somchai said,
adding that there were many other excise tools that could be used to generate
more income. Customs tax may be lowered further, he said, adding that this
would boost trade and investment.
The Thai economy would not stay flat but would expand
following investment in the 2-trillion baht worth of projects, Somchai said.
*US$1=29.5 baht
Suphannee Pootpisut
The Nation
Business & Investment Opportunities
Saigon Business Corporation Pte Ltd (SBC) is incorporated in Singapore since 1994. As Your Business Companion, we propose a range of services in Strategy, Investment and Management, focusing Health care and Life Science with expertise in ASEAN 's area. We are currently changing the platform of www.yourvietnamexpert.com, if any request, please, contact directly Dr Christian SIODMAK, business strategist, owner and CEO of SBC at christian.siodmak@gmail.com. Many thanks.
No comments:
Post a Comment