Income tax overhaul studied
Attempt to narrow social disparity
The Revenue Department is conducting a study to overhaul the structure of allowances, deductions and exemptions for personal income tax, aiming to alleviate the tax burden for middle-income earners and reduce tax benefits for higher-income earners to narrow social disparity.
The country’s richest 20% benefit the most from the current structure and can save as much as 2 million baht per tax year if they fully utilise the tax-free personal allowance and deductible expenses, said Ekniti Nitithanprapas, director-general of the Revenue Department.
The department wants to eliminate unnecessary tax allowances and deductions or reduce these tax benefits to enable the department to charge those in the top tax bracket higher tax bills and, in turn, lower tax liability for the middle-income bracket, Mr Ekniti said.
In the personal income tax structure, taxable income of 150,000 baht or lower is exempt from tax, 150,001-300,000 baht is charged 5%, 300,001-500,000 baht is charged 10%, 500,001 to 750,000 baht is charged 15%, 750,001-1 million baht is charged 20% and 1,000,001 to 2 million is charged 25%.
The income band for the 30% bracket is for 2,000,001 to 5 million baht, and the range for the top rate of 35% starts at income over 5 million.
For allowances and tax-deductible expenses, each individual taxpayer can claim a 60,000-baht tax allowance, a 50% income deduction (but only for up to 100,000 baht), a 30,000-baht child allowance for all biological children and up to three adopted children, insurance premiums of up to 100,000 baht for life protection products with at least 10-year terms, up to 200,000 baht for retirement insurance premiums and up to 100,000 baht for mortgage interest, plus a raft of contributions such as up to 9,000 baht for social security funds, provident funds, long-term equity funds (LTFs) and retirement mutual funds (RMFs).
There were 11.2 million personal income tax filers last year, but only 4 million paid tax because the remainder had income below the lowest tax bracket. Moreover, 3.4 million tax filers requested personal income tax refunds.
Mr Ekniti said the rich also enjoyed the most from allowances for LTF contributions, as only those in the higher income brackets could fully claim LTF contributions of 500,000 baht per tax year.
The Federation of Thai Capital Market Organizations (Fetco) has proposed that a new fund, dubbed the Sustainable Equity Fund (SEF), replace LTFs because the tax privilege is set to lapse at the end of this year.
Under Fetco’s proposal, the tax-deductible contribution for the new tax-saving fund will double to 30% of assessable income, up to 250,000 baht, while the lock-in period for the SEF remains unchanged at seven calendar years and the fund must allocate 65% of net asset value to stocks that meet environmental, social or governance goals, or to government infrastructure funds such as the Thailand Future Fund.
Individual taxpayers are allowed to deduct up to 15% of total annual income, or a maximum of 500,000 baht a year, whichever is lower, for contribution to LTFs.