Big changes in taxes possible

150,000 to 250,000 baht change in untaxed income. Of 9 million taxpayers only 18,000 in highest 37% bracket.

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Tax overhaul may reduce some perks; Officials believe system can be fairer by Wichit Chantanusornsiri & Nuntawun Polkuamdee

Incentives for insurance buyers, long-term equity funds and pension funds could be scaled back under a planned tax overhaul by the Finance Ministry.

Finance Minister Thirachai Phuvanatnaranubala said recently that the government planned a sweeping review of personal, corporate and consumption taxes with an aim to strengthen social equality and improve the economy's competitiveness.

Ministry officials said the review would include current deductions and allowances for personal income tax.

Under the current structure, the first 150,000 baht in annual income is exempt from taxes. Income above 150,000 baht is taxed on a progressive scale, ranging from 10% for income from 150,001 to 500,000 to a top rate of 37% for income above 4 million baht.

The tax code permits a number of deductions to reduce taxable income, including premium payments of up to 100,000 baht for life insurance policies and deductions up to 15% of income to a maximum of 500,000 baht per year for contributions to a long-term equity fund or retirement mutual fund.

One official said policymakers believe the deductions primarily benefit the wealthy, and should be cut back under a broader plan to increase equality.

Authorities will likely keep personal deductions, such as the 30,000 baht for both the taxpayer and spouse and 15,000 baht per child for up to three children.

At the same time, cuts in the more than 20 deductions and allowances now permitted would come with a higher exemption on taxable income, possibly to 250,000 baht from 150,000 now.

"Raising the income floor would benefit all taxpayers, those with the means to currently invest and enjoy certain deductions, as well as those who cannot," a ministry official said.

Mr Thirachai has also asked authorities to review overseas tax systems, including annual taxes that some countries charge on luxury cars.

But one change that has already been rejected is an increase in value-added tax, currently set at 7% but which under the law may be set to as high as 10%.

Thailand's tax base is relatively small compared with the size of the economy and population. The overwhelming majority of taxes, up to 90%, are imposed on income rather than on assets.

An effort by the Abhisit Vejjajiva government to tax land and property died last week in Parliament. And calls for an inheritance tax have made little progress due to political resistance.

Of the country's 67 million people, only around 9 million actually file annual tax returns, while just 18,000 people pay taxes at the maximum 37% bracket. 

But capital-market executives warn that reducing deductions given to encourage long-term investment could hurt the market. The incentives for long-term equity and retirement mutual funds were first initiated in 2004 under the Thaksin Shinawatra government to encourage the public to increase retirement savings and support the growth of institutional investors. 

Paiboon Nalinthrangkurn, chairman of the Federation of Thai Capital Market Organisations, said public participation in the markets was small relative to the population, with just 600,000 securities accounts and 3 million fund accounts.

"I think the government should increase the incentives offered for personal investment," Mr Paiboon said. "There are other options, such as state-enterprise privatisation or the establishment of state investment funds such as the Vayupak Fund that can be used to raise revenues for the government if needed."

Voravan Tarapoom, chairwoman of the Association of Investment Management Companies, said plans to cut corporate tax rates raised a separate issue regarding tax equality. The government plans to cut the 30% corporate rate to 23% in 2012 and to 20% by 2013. 

But Mrs Voravan said that currently, the highest personal tax rate, 37%, was equivalent to taxes paid directly and indirectly by investors. 

A company profiting 100 baht per year, for instance, must pay 30 baht in corporate tax. If the remaining 70 baht is paid as dividends, a 10% withholding tax equals 7 baht, for total tax payments of 37 baht or equal to a 37% rate. 

A 20% corporate rate, and 10% dividend withholding tax would cut the total payment for the same company [to 28 baht or] 28%.

Mrs Voravan said that unless personal tax rates fall, top earners will shift income to companies to obtain lower rates.

"What will the government do? Reduce personal tax rates or throw away the concept of tax equality," she asked

(Source: Bangkok Post, Economics, Tax overhaul may reduce some perks, Officials believe system can be fairer, 3/10/2011, Wichit Chantanusornsiri & Nuntawun Polkuamdee, link) 

Tax Vocabulary

income - money that people receive from work or some other source, used for household consumption and savings
personal income - the money that one person makes during one year (from a company salary or income from a business, for example)
personal income tax - the tax that one person pays on their personal income (See Wikipedia)
tax allowance - the amount you can subtract from your income before you calculate tax you have to pay the government
allowances for personal income tax - amounts subtracted from personal income before calculating tax paid

exempt - permission not to do something
exempt from taxes - untaxed income; don't have to pay taxes on this income

overhaul - check and make repairs on every part of a machine or system; improve something so that every part of it works properly ปรับปรุงใหม่
tax overhaul - a complete change in the government's tax system (to improve the system, allegedly)

perks - 1. special extra things that certain people get; 2. extra things an employee receives in addition to their salary

insurance - making regular payments in exchange for a large payment to cover damage if a certain bad event happens (accident, sickness, fire, natural disaster) (See Wikipedia) การประกันภัย
premium - same as "insurance premium"
insurance premium - the amount paid regularly to receive insurance
life insurance policies - the contract that a person who buys life insurance

equity - money for a business that comes from owners (shareholders, owners of the company's stock shares), not borrowed money (debt) เงินลงทุน ที่มาจากการระดมหุ้นของหุ้นส่วน และผู้มีกรรมสิทธิ

funds - money collected for a special purpose (for investment in companies or projects) เงินทุน
equity fund - an investment company that invests the money that people pay into it in shares, also called a "stock fund" (See Wikipedia)
 
pension fund - a system for saving money when young and working to spend during retirement when not working; a regular payment by a company or the government to people after their retirement เงินบำนาญ เงินบำเหน็ด บำนาญ (See Wikipedia)

scaled back - size reduced (will be smaller in the future)

review - looking carefully at the way things are currently done (policy, procedure, process, etc) to see if they can be improved, if they should be changed
sweeping review - checking everything with the goal of possibly changing everything

personal taxes - taxes that individual people pay to the government, a percentage of the income they earn each year (Same as "personal income tax" below)
corporate taxes - taxes that large businesses (corporations) pay to the government

consumption - 1. using, eating or drinking something; 2. money spent by households and families on goods and services การบริโภค (See Wikipedia)
consumption taxes - taxes on things that people buy (See Wikipedia)

aim - purpose; goal;  the thing you hope to achieve by doing something เป้าหมาย จุดมุ่งหมาย

social equality - the state of all people being equal in a society, especially in having the same rights, status and opportunities ความเสมอภาค

improve - to make better ทำให้ดีขึ้น
competitiveness - how well a business can do compared to other firms (does it have lower price or higher quality?); how well a company is able to maintain or gain customers in a market การแข่งขัน

current - of the present time ปัจจุบัน

deduction (verb) -  taking an amount of money away from a total
deduction (noun) - amount taken away from a total
tax deduction (noun) - a reduction in the amount of tax that you have to pay, which is allowed to companies or people in particular situations (See Wikipedia)

annual - happening once a year ประจำปี
annual income - the amount of money that a person or company makes in one year as "income"

taxed on a progressive scale - the more you make (taxable amount) the higher the tax rate (percentage paid as tax)

income tax rate - the percentage of income (actually taxable income) paid as taxes
top rate - highest income tax rate; highest percentage of income paid as taxes
rate - the level or speed at which something happens or changes, or the amount or number of times it happens or changes in a particular period อัตรา

code - rules of proper behaviour for a particular job, organisation, etc. มาตรการ, กฎเกณฑ์, ระเบียบ
tax code - the tax laws of the country

taxable income - the income you actually have to pay tax on (See taxable income)

maximum - the most possible ที่สูงสุด ที่มากที่สุด
contributions - the amount given by each member to the shared fund

fund -  money collected together for some purposeเงินทุน กองทุน
mutual fund - an organization that manages a fund that is invested in a wide range of shares, bonds, etc. The fund is divided into small units which are bought and sold, usually by people who only invest a small amount of money (See Wikipedia)

retirement - when a person stops working around age 60 after many years of work การเกษียรอายุ
retirement mutual fund - a "mutual fund"used to save money for retirement

benefit - to help someone มีประโยชน์ต่อ
wealthy - rich, has a lot of money and assets มั่งคั่ง ร่ำรวย
deductions primarily benefit the wealthy - only rich people really save money by using deductions

cut back - reduce  
cut back deductions - reduce deductions

spouse - wife

exemption - permission to not have to do something, such as making a payment, following a rule, etc. ข้อยกเว้น
higher exemption on taxable income

income floor

taxpayers - people who pay taxes (who don't want to see their hard-earned money wasted) ผู้เสียภาษี

means - methods; ways วิธี, วิธีการ
those with the means to invest - people with enough money to invest

enjoy deductions - actually receive the deductions when paying taxes 
ministry - a government department dealing with an area of activity กระทรวง

authorities - government officials; the police or people in official organisations who have the legal power to make people obey laws or rules เจ้าหน้าที่ (ตำรวจ หรือผู้มีอำนาจ)

overseas tax systems - the tax systems and laws of other countries
charge a tax on Y - require that people pay a tax on Y

luxury - the best and most expensive of something ที่หรูหรา
luxury goods - expensive goods bought by the rich, that are not essential to life, such as luxury cars (See Wikipedia)
luxury tax - a tax paid on luxury goods (See Wikipedia)

valued-added - the amount by which the value of a product increases at each stage of the production process
value-added tax (VAT) - a consumption tax paid on the purchase price of some item, but for companies a tax paid at each stage of the production process on "value-added" to the product ["From the perspective of the buyer, it is a tax on the purchase price. From that of the seller, it is a tax only on the value added to a product, material or service, from an accounting point of view, by this stage of its manufacture or distribution. The manufacturer remits to the government the difference between these two amounts, and retains the rest for themselves to offset the taxes they had previously paid on the inputs."] (See Wikipedia)

tax base - the people in an economy or country who actually pay taxes (Thailand has a very small "tax base" meaning that most people in Thailand do not pay taxes)

population - all the people who live in one country, area or place กลุ่มที่อาศัยอยู่ในบริเวณหนึ่ง

majority - more than 50 percent of a group; more than half of the people in a group ส่วนมาก
overwhelming majority - almost all (close to 90%)

taxes imposed on Y - force someone to do something or follow some rule
imposed - force people to use

assets - a thing of value that a person or a company owns, for example: stocks, bonds, real estate, loans to others, or money ทรัพย์สิน

effort - an attempt to do something ความพยายาม
land and property tax - tax paid on the value of real estate (land + buildings) owned (See Wikipedia)

inheritance - money or property that someone gives you when they die มรดก ทรัพย์สินที่ได้รับมรดก
inheritance tax - tax paid on money received from parents or grandparents when they die (See Wikipedia)

progress - advance, go forward; completing tasks that move you towards achieving a goal;  improving and developing over time ความก้าวหน้า พัฒนาการ
made little progress  

resistance - a refusal to accept something or allow it to happen;  trying not to do what people are trying to force you to do การต่อต้าน, การขัดขืน
political resistance - when something in the political process will not allow something to happen (example: politicians who are rich and personally affected will not let it happen)

tax return - 1. a statement of how much money a company or person has earned and their expenses, used by the government to calculate how much tax they have to pay; 2. the actual paper form or document with this statement

file annual tax returns - officially give (submit) the tax return to the government along with money to pay taxes that have not been paid yet (not sutracted from pay checks during the year)
file - to take official action ยื่นคำร้อง
the maximum 37% bracket - the highest percentage of income that a person must pay in taxes

capital - money invested in a business (See glossary)
capital markets - markets in which different forms of business investment are bought and sold such as stock markets, bond markets and money markets (See Wikipedia)

executives - a high level manager in a company (making plans and ensuring they executed successfully) ผู้บริหาร
capital-market executives

encourage - to make someone more likely to do something, or to make something more likely to happen;  make people interested in and excited about doing an activity ปลุกใจ
investment - taking your money and putting it into projects to make a profit or earn interest (buying stock shares, bonds, real estate)

deductions given to encourage long-term investment

initiated - created; started ริเริ่มโดย

institutional investors - large companies and organizations such as insurance companies, pension funds and investment funds that invest other people's money as part of their business (See Wikipedia)
support - help สนับสนุน
support the growth of institutional investors - do things to make institutional investors invest 

participation - active engagement; being involved in an activity (rather than merely watching it happen)
participation in the markets [for investments] was small relative to the population - very few people invest

securities accounts - accounts at banks or investment companies that are invested in stocks, mutual funds or bonds (securities) 

increase the incentives offered for personal investment - offer people rewards or benefits so that they invest their money
incentives - a reward to encourage people to do something; rewards for behaving in a certain manner สิ่งกระตุ้น รางวัล ผลตอบแทน

state-enterprise privatisation - turning a government owned company into a privately owned company with stock shares and shareholders
state - government รัฐ
enterprise - an organization, especially a business กิจการ, บริษัท,อุตสาหกิจ,วิสาหกิจ
privatisation - change a government owned company into a privately owned company (owned by stockholders) การแปรรูปรัฐวิสาหกิจ

state investment funds - money invested by the government
Vayupak Fund - a state investment fund created during the Thaksin adminstration in 2003 to raise money directly from the public and bypass commercial banks (See previous article)

options - choices ทางเลือก

revenues - money received by a business or government รายได้; รายได้ของรัฐ

issue - a problem that needs to be considered ประเด็น
raise an issue - introduce a problem for discussion and debate (actually start the debate)

equivalent - the same as เท่าเทียมกันกับ

withholding tax - tax taken out of income immediately (on salary or dividend payments on stock investment, for example) (See Wikipedia)

dividend - the regular annual payment from a company's profits to the investors who hold the company's stock (shareholders)

shift - to transfer; to move from one place to another เคลื่อนย้าย
shift income to companies to obtain lower rates - owners not taking money out of company as personal income because of lower tax rate for company, so they keep the money in the company

concept - a principle or idea ความคิด
concept of tax equality - the reality that people will shift money between their company and personal income, to make taxes paid as small as possible

What will the government do? Reduce personal tax rates or throw away the concept of tax equality -