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Parties wooing voters with tax-cut packages

September 15, 2000

Thanong Khanthong compares the tax-cut proposals of the Democrat Party and the Thai Rak Thai Party.

Trying to score a political comeback and recover lost ground, the Democrats are preparing to roll out a tax-cut proposal aimed at winning back some votes and providing the economy with an added stimulus.

Included in their economic platform is a plan to cut corporate income tax from 30 per cent to 25 per cent. Companies investing in science and technology and human resources development will be entitled to tax breaks. Personal income tax allowances will also be expanded.

It is no coincidence that the Democrats' tax proposal is similar to that of the Thai Rak Thai Party, which is putting the final touches on its proposal. Thai Rak Thai's taxman, Dr Suvarn Valaisathien, has called for the government to bring down the corporate income tax from 30 to 25 per cent to stimulate private investment.

 

Included in their economic platform is a plan to cut corporate income tax from 30 per cent to 25 per cent. Companies investing in science and technology and human resources development will be entitled to tax breaks. Personal income tax allowances will also be expanded.

In vying for tax cuts, both the Democrats and Thai Rak Thai are pursuing expansionary economic policies. Proposals for a tax hike or fiscal consolidation in this election year are sure to be taboo. Already the Thai people are worried about the fragile economic recovery, not to mention the hardship imposed by higher oil prices and the threat of rising prices for goods and services.

The latest International Monetary Fund survey puts Thailand's economic growth at 4.5 per cent. With higher oil prices, a weaker baht and a possibly weaker domestic demand, there are fears that this growth rate might not be achieved. But the central bank has not yet revised its economic growth-rate projection for this year, now at 4.5 to 5.5 per cent.

The Democrats have been criticised for pursuing a stabilisation policy to jam the brakes on the foreign exchange crisis for too long, which critics say has resulted in sluggish economic growth of 4.5 to 5 per cent compared with the regional average of 6.5 per cent.

"I think the government earlier put too much emphasis on stabilisation. They did not pursue a growth policy quickly enough," said Dr Nimit Nonthapunthawat, chief economist at Bangkok Bank.

Thaksin Shinawatra, the telecoms tycoon and leader of Thai Rak Thai, has already announced that if elected, he would pursue an expansionary policy to boost the Thai economic growth rate to 7 per cent.

This announcement means that fiscal consolidation to stem the rise of public sector debts would not happen, at least in the medium term.

His tax proposal, which is still a subject of debate within the party, initially calls for the corporate income tax to fall to 25 per cent. According to political sources, an alternative is to impose a 20-per-cent tax on corporate profits of at most Bt2 million, a 25-per-cent tax on corporate profits of between Bt2 million and Bt4 million, and a 30-per-cent tax on corporate profits of more than Bt4 million. This progressive rate is designed to support small and medium-sized enterprises.

The Thai Rak Thai proposal includes an expansion of the zero tax bracket from Bt50,000 a year to Bt80,000. This means that if you make Bt80,000 a year, which is now subject to a minimum personal income tax of 5 per cent, you wouldn't have to pay tax at all.

There will be a variety of tax measures in the Thai Rak Thai Party proposal, including a personal income tax deduction for senior citizens. The tax proposal is also aimed at promoting long-term savings by increasing the maximum individual contribution to provident funds from 15 per cent to 20 per cent of base salary.

In this election year, tax cuts are one of the key measures to woo voters. And it looks as if the Democrats are more willing than in the past to embrace a full-fledged expansionary economic programme.

 

 

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