fiscal policy office tax incentives: thailand’s experience imf tax policy seminar for asian and...

Fiscal Policy Office

TAX INCENTIVES: Thailand’s experienceTAX INCENTIVES: Thailand’s experience

IMF Tax Policy Seminar for Asian and Pacific Countries on Tax incentives

Tokyo, Tokyo, June June 9th, 9th, 20092009

Financed by JSAFinanced by JSA

Lawan PuwanDirector of Tax Policy Bureau

Fiscal Policy Office, Ministry of Finance

Ministry of Finance, Fiscal Policy Office

Tax Policy Bureau


• Thai Tax SystemThai Tax System

• Tax Incentives in ThailandTax Incentives in Thailand

• Thailand’s Recent Economic SituationThailand’s Recent Economic Situation

• Economic Stimulus Measures & Economic Stimulus Measures & ImpactsImpacts

• ConclusionConclusion

Presentation OutlinePresentation Outline

2


Tax Policy Bureau


Thai Tax SystemThai Tax SystemThai Tax SystemThai Tax System

3


Tax Policy Bureau


Development of Thai Tax systemDevelopment of Thai Tax system

Various types of taxes, tax bases and tax Various types of taxes, tax bases and tax rates.rates.

Rely on indirect taxes.Rely on indirect taxes. Direct taxes becomes more important.Direct taxes becomes more important. Declining trend of import duties.Declining trend of import duties. Emphasize more on domestic taxes.Emphasize more on domestic taxes.

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Tax Policy Bureau


Tax StructureTax Structure Taxes collected by National AuthoritiesTaxes collected by National Authorities

Income Taxes & Value Added Tax (VAT) & Income Taxes & Value Added Tax (VAT) & Specific business taxes collected by Revenue Specific business taxes collected by Revenue DepartmentDepartment

Excise Tax collected by Excise DepartmentExcise Tax collected by Excise Department Custom duties collected by Customs DepartmentCustom duties collected by Customs Department

Taxes collected by Local AuthoritiesTaxes collected by Local Authorities Land and Housing TaxLand and Housing Tax, , Land Development TaxLand Development Tax

Signboard Tax, Slaughter Tax, Signboard Tax, Slaughter Tax, Swallow Bird’s nest Swallow Bird’s nest DutyDuty, , Petrol Stations Tax, Hotel Tax Petrol Stations Tax, Hotel Tax and and Retail Retail Tobacco TaxTobacco Tax

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Tax Policy Bureau


Personal Income Tax : PITPersonal Income Tax : PIT Tax BaseTax Base : net income earned during 1 yr. after deduction of : net income earned during 1 yr. after deduction of

expenses and allowances. expenses and allowances. Tax rateTax rate : Progressive Rate from 10 to 37 % : Progressive Rate from 10 to 37 %

Corporate Income Tax : CITCorporate Income Tax : CIT Tax base and Tax rateTax base and Tax rate

Tax BaseTax Base Tax RateTax Rate

Net Profit after deductible Net Profit after deductible expensesexpenses

30% *30% *

Income before expenseIncome before expense 3 - 10%3 - 10%(depend on income type)(depend on income type)

Profit disposed out of ThailandProfit disposed out of Thailand 10%10%

• Income TaxIncome Tax

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Tax Policy Bureau


• Value Added Tax (VAT)Value Added Tax (VAT) VAT in Thailand was introduced in Jan. 1, 1992VAT in Thailand was introduced in Jan. 1, 1992 Tax base and Tax rateTax base and Tax rate

A consumption type with full tax credit and invoice baseA consumption type with full tax credit and invoice base

TypeType Rate Rate (%)(%)

- General goods and servicesGeneral goods and services 10 10 **

- Exported goods and servicesExported goods and services 00

- Small entrepreneurs with annual sale amount Small entrepreneurs with annual sale amount less than 1.8 mil. Bahtless than 1.8 mil. Baht

- Some goods and services i.e. Some goods and services i.e. Unprocessed Unprocessed agricultural products, Domestic transportation andagricultural products, Domestic transportation and Amateur sports etc.Amateur sports etc.

ExemptExempt

reduce from 10% reduce from 10% to 7% until Sept to 7% until Sept 30, 200730, 2007

reduce from 10% reduce from 10% to 7% until Sept to 7% until Sept 30, 200730, 2007

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Tax Policy Bureau


• Specific Business Tax (SBT)Specific Business Tax (SBT)

Basic ConceptBasic Concept Imposed on various commodities and services; Imposed on various commodities and services;

Banking /similar business, finance, credit Banking /similar business, finance, credit fancier, securities business, insurance, pawn fancier, securities business, insurance, pawn brokerage, real estate business and sale of brokerage, real estate business and sale of securities in the SETsecurities in the SET

Impose at flat rate from 2.5%-3.0% excluding Impose at flat rate from 2.5%-3.0% excluding 10% local tax on top 10% local tax on top

Excluded from the VAT systemExcluded from the VAT system

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Tax Policy Bureau


Excise TaxExcise Tax A selective / single stage sales taxA selective / single stage sales tax

Roles of excise: In line with conventional objectives Roles of excise: In line with conventional objectives of the exciseof the excise

20 categories of goods and services are subject to tax20 categories of goods and services are subject to tax

Petroleum, Automobile, Tobacco, and Alcohol Petroleum, Automobile, Tobacco, and Alcohol generating > 75% of excise tax revenuegenerating > 75% of excise tax revenue

Tax base : ex-factory price (domestic products) and Tax base : ex-factory price (domestic products) and CIF + Import duties (Imported products) CIF + Import duties (Imported products)

Tax rate: specific or ad-valorem rateTax rate: specific or ad-valorem rate

9


Tax Policy Bureau


Customs DutiesCustoms Duties An indirect tax levied on both imported and

selected exports Classification of imports based on the harmonized

commodity description and coding system Duties are levied on a specific or an ad-valorem basis, whichever is higher Tax Base : the CIF Value Customs tariffs at present ranged between

0% - 80%, the highest rate being for passenger cars

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Tax Policy Bureau


Tax Incentives in ThailandTax Incentives in ThailandTax Incentives in ThailandTax Incentives in Thailand

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Tax Policy Bureau


Tax Incentives in Thailand

Tax incentives for investment

Tax incentives for export promotion

Tax incentives for social welfare

Tax incentives for promoting renewable

energy

etc.

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Tax Policy Bureau


Tax Incentives for investment promotion

Restructuring the import duties classified by value escalation:

Under the Investment Promotion Act of 1977, the Board of Investment

is authorized to grant incentives and privileges to qualified investments.

- Investment promotion zones used to support government goals.

- The BOI offer 2 kinds of incentives to promoted projects.

Tax incentives: exemption/reduction of import duties on machinery and

raw materials

: exemption of CIT (3-8 years)

Non-tax incentives : permission to bring in foreign workers

: own land and take or remit foreign currency abroad.

13


Tax Policy Bureau


3 Zones1. Agriculture & agricultural

products

2. Direct involvement in tech & HR development

3. Public utilities, basic services and infrastructure

4. Environmental protection and conservation

5. Targeted industries

Types of the priority projects

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Tax Policy Bureau


Tax Incentives for export promotion

MeasuresMeasures Responsible Responsible

OrganizationOrganizationPrivilegesPrivileges

1. Duty Drawback 1. Duty Drawback under Section 19 bisunder Section 19 bis

Customs Customs

DepartmentDepartmentRefund of import dutiesRefund of import duties

2. Duty 2. Duty CompensationCompensation

Fiscal Policy OfficeFiscal Policy Office

& Customs & Customs DepartmentDepartment

Refund of import dutiesRefund of import duties

3. Manufacturing 3. Manufacturing Bonded WarehouseBonded Warehouse

Customs Customs DepartmentDepartment

Exempt import dutiesExempt import duties

4. Custom Free Zone4. Custom Free Zone Customs Customs DepartmentDepartment


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Tax Policy Bureau


Tax Incentives for export promotion

MeasuresMeasures Responsible Responsible

OrganizationOrganizationPrivilegesPrivileges

5. Industrial Free 5. Industrial Free Zone (IFZ)Zone (IFZ)

Industrial Estate Industrial Estate Authority Authority


6. Duty Exemption 6. Duty Exemption under Investment under Investment Promotion ActPromotion Act

Office of the Board Office of the Board of Investmentof Investment


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Tax Policy Bureau


Export (No tax incentive) BOI Bonded Warehouse

Duty Compensation Duty Drawback > 1 incentives

32.65%

25.20%

1.78%

21.97%

6.49% 11.92%

EXPORT VALUE CLASSIFIED BY TAX INCENTIVES

Source: Information and Communications Technology Center, Ministry of Finance

: The Customs Department, Ministry of Finance17

2008


Tax Policy Bureau


Thailand’s Recent Economic SituationThailand’s Recent Economic SituationThailand’s Recent Economic SituationThailand’s Recent Economic Situation

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Tax Policy Bureau


Global Crisis and Impacts to ThailandGlobal Crisis and Impacts to ThailandGlobal Crisis and Impacts to ThailandGlobal Crisis and Impacts to Thailand

GlobalGlobal

ThailandThailand

Financial InstitutionsFinancial Institutions Liquidity IssueLiquidity Issue Real SectorReal Sector

Declining asset value & writedown

Crisis of confidence led to credit crunch and insolvency threats

Lower income from contraction of global demand and production

Lower Consumption

Negative impact on our export-driven economy

Limited impact in terms of liquidity

Liquidity Problem & Lower Investment

Ample liquidity in banking Sector

Credit issues of corporates (particularly

SMEs)

Banks are reluctant to lend

Unlike financial crisis in 1997, Thai financial institutions and

corporates have stronger balance sheet

• Low leverage ratio• Sufficient capital base• Low NPL ratio

Capital & Liquidity to Support Recovery

31 2

Limited impact as Thai banks have only 0.4% related to CDOs

13 2

Note: (1) Thai banks have only 1.2% of total assets exposed to foreign assets (2) Export accounts for 72% of total GDP

• Contraction in export• Lower capacity utilization• Increase in unemployment• Dampened consumer confidence

Overclouded by political crisis

?

19


Tax Policy Bureau


Real GDP (% yoy)6.3

5.3 4.5 4.3 4.4 4.4 5.1 5.7 6.0 5.33.9

-4.3-5-4-3-2-101234567

Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4 Q1 Q2 Q3 Q4

2006 2007 2008

Real GDP QReal GDP Q42008/42008/ Contracted Contracted - %43 - %43 yoy yoy

2006 5.2% 200749. % 2008 2.6%

.

Source : National Economic and Social Development Board 20


Tax Policy Bureau


Growth rate : %YOY(Share of GDP)

2007 2008

200820

09

Q1 Q2 Q3 Q4 Dec Jan

Real private consumption 518( . %) 1.6 25. 27 25. 27 22. -Private consumption indicator

Real value added tax 36. 9 .111 .5

9.4 16.14

0 .1

-3.4

-162.

No. of passenger car sales-1 1 .3

32.7

3

9.1

24.8 22.34

7.5

9

8 .2

-100

Motorcycle sales -16.8 79. 1.5 6.2 16.2 8.0 14.1-216

Agricultural Price 1225.

1

18.2

3

8.2

35.5 9.1 5.0 02.

Import of consumer goods (value)24.6

26.7

3

7.7

3

7.4

35.8 1.4 -2.5-179

Import of consumer goods (volume)20.3

20.1 29.7 28.4 29.8 -2.5 -5.9

-204

Consumer confidence index71.0

70.7

7

2.5

7

1 .9

70.6 67.76

7.5

68.3

Thailand’s Economic Indicators : Private Consumption

Note: Real VAT (Feb 09): -24.2% YOY;

CCI (Feb 09): 67.2 Source : Compiled by FPO 21


Tax Policy Bureau



2007 2008

200820

09

Q1 Q2 Q3 Q4 Dec Jan

Real private investment 166( . %) 0.6 3.26 .5

4 .3

35.-1.3

-

Private investment in machinery 128( . %) 1.6 4.28.3

5.2

5.4

-1 .4

-

Private investment in construction 37( . %) -2.7 -0.20.4

1 .3

-1 .9

-0.7

-

Private investment indicator

Import of capital goods (volume) -12 12.93

1 .3

9.8

13.1 0.6 -7.0-

29.8

Import of capital goods (volume) excluding special items*

1.1 11.4 20.0 16.5 12.5 4.5 3.0-19.9

Commercial car sales-6.0

-15.87.7

-5.6-

25.8-

32.7-

32.8-

39.5

Real estate tax collection* * 0.8 -1.1 -3.9

2

9.3

22.2 -4.1-

16.90.8

Domestic cement sales-5.0

-10.3 -5.9 -5.3-

16.5-

13.9-2.1

-11.9

Note: * Special items such as airplane, ship, train; ** Adjusted for temporary tax rate reduction to 0.1%

Real Estate Tax Collection (Feb 09): -13.2% YOY

Thailand’s Economic Indicators : Private Investment

Source : Compiled by FPO 22


Tax Policy Bureau


Unit(billion Baht)

2007 2008

20082009

Q1 Q2 Q3 Q4 Dec Jan Feb

Net revenue 1,470.4 1,495.8 308.8 499.0 412.9 272.8 76.2 88.6 82.4

%y-o-y 6.9 1.7 -0.8 15.5 3.1 -16.1 -16.5 -8.6 -29.1

- Income-based tax 588.1 665.8 110.2 227.7 227.1 100.9 26.4 36.8 31.8

%y-o-y 6.8 13.2 12.2 16.2 17.4 0.3 -6.5 6.3 -1.8

- Consumption-based tax 445.2 501.7 124.5 127.4 133.9 115.9 36.8 36.1 30.1

%y-o-y 4.9 12.7 15.7 15.8 21.8 -1.5 -6.9 -18.3 -25.2

Government expenditure12)

1,668.1 1,644.4 402.2 424.6 413.3 404.3 145.4 192.417

97.

%y-o-y 25.1 -0.3 -8.0 1.8 -1.6 2.8 31.2 21.55 3 .3

- Current expenditure 1,273.2 1,296.1 292.3 320.6 348.9 334.3 118.4 126.013

2 .6

%y-o-y 27.4 3.3 -8.3 1.9 3.6 10.3 34.2 34.135.4

- Capital expenditure 297.7 240.9 76.8 86.5 49.5 28.1 9.5 52.033.9

%y-o-y 37.7 -19.1 -12.3 -0.2 -28.0 -48.7 -2.0 -1.821

78

- Carry over 97.2 107.5 33.1 17.5 14.9 42.0 17.6 14.413.1

%y-o-y -17.0 10.7 6.7 8.4 2.1 18.8 35.1 25.530.8

Thailand’s Economic Indicators : Fiscal sector

Source : Compiled by FPO


Tax Policy Bureau



20

07

20

08

2008200

9

Q1 Q2 Q3 Q4 Dec Jan

Real export 568( . %) 6.76.0

7.5

9.8

1

2.6

-8.9

- -

Value $ term (Custom Dept.) 18

6

15

6

2

3.1

2

8.1

2

6.1

-10.6

-14.6 -265.

Price $ term (Ministry of Commerce) 5.7

10

5

9.9

12.5

15.0

4.6

1.7 09.

Volume $ term (FPO) 12.24.4

12.0

13.9

9.7-14.6

-16.0 -271.

Main export goods (share of total export in 2008)

Electronic goods 175( . %) 14.90.7

10.0

12.6

6.2-218

-34.6 -404.

volume $ term 9.7-2.0

7.313.4

0.1-

24.3-36.8 -421.

Electrical appliances 101( . %) 15.66.1

14.2

14.3

16.1

-17.3

-20.7

-295.

volume $ term 13.5 1710.2

9.510.4

-20.6

-23.5

-307.

Vehicles 110( . %) 32.521

3

34.3

31.0

35.7

-10.4

-20.7

-345.

volume $ term 20.915

4

27.2

25.0

28.3

-14.2

-23.7

-371.

Agro industry sector 66( . %) 19.123

4

14.4

27.8

38.2

13

697. -75.

volume $ term 16.57.7

-1.9 7.419.1

6.2

80. -82.

Agricultural sector 113( . %) 15.532

8

39.9

56.7

57.5

-115

-27.9

-334.

volume $ term 5.70.2

14.3

7.5 3.4-19.2

-27.1 -345.

Fuel 68( . %) 8.961

0

87.9

96.6

95.1

-7.7

-15.3

-451.

volume $ term -2.323

4

32.6

30.1

27.2

1 1 .4

26.1 -191.

Thailand’s Economic Indicators : Export

Source : Compiled by FPO


Tax Policy Bureau



20

07

20

08

2008200

9

Q1 Q2 Q3 Q4 DecJan

Real import 456( . %) 22. 69.10.054.

12.501. - -

Value $ term (Custom Dept.)8.7

27.6 3

8.0

2

9.3

3

9.9

6.1 -6.5 -37.6

Price $ term (Ministry of Commerce) 5.3

12.6 15.6

17.7

16.0

2.1 -2.3 -35.

Volume $ term (FPO) 3.2

13.1 19.3

9.8 20.5

3.7 -4.3 -35.3

Main import goods (share of total import in 2008)

Raw materials 434( . %)14

8

29.3 29.4

30.1

48.3

9.4 -15.2 -41.9

volume $ term 8.1 16.7 17.4

15.7

31.2

2.6 -18.8 -43.4

Capital and machinery 242( . %)0.9

18.0 37.6

16.2

18.4

3.5 -4.9 -29.5

volume $ term -1.1 12.9 31.3

9.8 13.1

0.6 -7.0 -29.8

Consumer goods 83( . %)24

7

26.7 37.7

37.4

35.8

1.4 -2.5 -17.9

volume $ term 20

3

20.1 29.7

28.4

29.8

-2.5

-5.9 -20.4

Fuel 209( . %)2.2

43.9 68.4

50.2

60.4

5.9 4.0 -53.4

volume $ term -5.5

10.6 13.8

-1.7

10.3

20.9

45.0 -35.4

Thailand’s Economic Indicator : Import

Source : Compiled by FPO 25


Tax Policy Bureau


Economic Stimulus MeasuresEconomic Stimulus Measures

Objectives: 1. To increase welfare & support SMEs / enterprise community

2. To promote real estate sector

3. To promote tourism

4. To promote debt restructuring and M&A

Measures: Fiscal instruments:

Tax policies, government spending

Monetary instruments

26


Tax Policy Bureau


Tax incentives for social welfare

Allowances:

- Disable person

- Life insurance premium

- Long term saving

- Education

- Aging

etc.

27


Tax Policy Bureau


Tax incentives for renewable energy

Reduce the excise tax rate:

- Gasohol with ethanol content not less than 10%, 20%, and 85%

- Bio-diesel

- Passenger /public transport vehicles (< 10 seats):

- E20, E85, and NGV

- Hybrid Electric Vehicles

- Electric Powered Vehicles

- Fuel Cell Powered Vehicles

- Eco car

28


Tax Policy Bureau


Tax incentives for renewable energy (cont.)

Reduce import duties:

- NGV equipments and engines

- CKD Chassis with Engine and Chassis with Engine for transport cars

Deduct 125% of PIT and CIT for purchase of energy saving equipment

29


Tax Policy Bureau


Conclusion

fiscal policy office tax incentives: thailand’s experience imf tax policy seminar for asian and...

Documents

income tax income tax

tax credit

local tax

slaughter tax

hotel tax

housing tax

tax bases

tax rates