THE NATIONAL Legislative Assembly (NLA) has agreed that the value-added tax (VAT) should be increased from 7 per cent to 8 per cent.
However, the final decision on the tax hike will be made by the Cabinet after the NLA submits its proposal for approval.
The proposed VAT hike is part of tax reform package proposed by NLA’s committee on the economy, finance and fiscal affairs.
Increasing the VAT by 1 per cent would result in Bt60 billion to Bt70 billion more in government revenue, according to the committee.
Prime Minister General Prayut Chan-o-cha’s government has maintained the VAT at 7 per cent for fear of public opposition.
The tax reform package also includes a proposal to have several VAT rates designed to meet consumption, import and export patterns.
Revenue from a 1 per cent increase should be earmarked for education and public health spending. The proposal also includes a windfall tax being collected on land owners whose asset price rises because of government infrastructure projects such as high speed train routes passing their land.
The committee also wants the government to consider whether it could allow private companies to have several financial accounts in line with business units or branches.
Meanwhile, former finance minister Thirachai Phuvanatnaranubala, told the Nation that he did not agree with a tax hike.
He said people have high debt and consumption remains sluggish due to slower growth in the economy. He said he did not think people could afford a higher VAT tax rate.
“If the government plans to increase the VAT rate then people will ask whether the government has tried hard enough to cut some of spending on projects deemed not to be a priority,” said Thirachai.
However, he agreed on different VAT tax rates. For example, the VAT rate on consumption of luxury goods may be higher than others, he said.
Thirachai said during his tenure at the Finance Ministry in 2011 there was a proposal to hike VAT but economic conditions were not good enough and the country had suffered from a flood disaster.
Prapas Kong-ied, deputy permanent secretary of Finance Ministry said the ministry might need to study the impact of a VAT hike if the Cabinet asks the Finance Minister to do so.
In March this year, the Prime Minister made a controversial remark asking people whether they would accept a 1 per cent VAT hike. Then the local press made headline news suggesting the government planned to increase VAT. But Prayut and other ministers had denied the VAT hike plan.
The government estimated VAT revenue for 2017 fiscal at Bt790 billion.