Overhaul due for taxation

The Nation (16 November 2007)

Thailand's revenue code, which determines the taxes paid by all individuals and companies, is to be overhauled by the Revenue Department in collaboration with the Law and Development Research Centre of Chulalongkorn University's Faculty of Law.

The move, which aims to make the country's tax laws simpler and fairer, will possibly propose increases in personal, corporate and value-added taxes.

The overhaul will be preceded by a comprehensive study of taxation laws that is expected to be completed by the middle of next year.

The dean of Chulalongkorn University's Faculty of Law, Tithiphan Chuerboonchai, said yesterday that the outcome of the study would be put as a proposal to the new government.

The study will strive to make the current complicated revenue code readable by laymen and will revise crucial principles of taxation.

Fox example, Tithiphan said he did not agree with the current requirement that a husband and wife be regarded as one taxpayer. This had resulted in higher tax payments than if a couple filed separate personal tax returns. So instead of supporting families, the current law favoured couples who lived together without marriage registration.

Small private firms have also complained that they are placed at a disadvantage when dealing with tax officials. Small and medium-sized firms without the financial resources to hire lawyers or specialist accountants say they often end up with high tax bills. But large firms who can afford expert help end up paying less. Tax evasion is also widespread among private firms because lawyers and auditors show them how to "doctor" their books to avoid full payments, Tithiphan said.

Some complain that businesses waste their resources by filing tax documents twice a month and have asked for a friendlier system.

Tax officials are also accused of giving inconsistent advice about tax payments, resulting in discriminatory practices.

Revenue Department director-general Sanit Rangnoi admitted that the revenue code was out of date because it had been in use for nearly 70 years without major change.

The department has from time to time made minor changes to the code but these have led to more complication because new rules and regulations pile up and often contradict each other or the code itself, Sanit said.

Sanit said the Finance Ministry and the Revenue Department were also considering expanding Thailand's tax base.

Although personal income tax has a progressive rate from 5 per cent to 37 per cent, average taxpayers pay only 5 per cent, which is very low. This is because current tax exemptions and allowances are large, he said. Out of a population of 65 million, only four million Thais pay personal income tax, and most of them are salary earners.