A new round of stimulus measures to help small and medium-sized enterprises (SMEs) will include 100 billion baht in soft loans, tax cuts to 10%, tax exemptions for start-ups, a 100-billion-baht credit guarantee and a 6-billion-baht venture capital fund in another effort to revive the faltering economy.
The measures will be submitted for cabinet approval today.
Under the package, SME start-ups will receive a five-year corporate income tax exemption, while existing SMEs will see their tax burden reduced to 10% for two years for net profit of more than 300,000 baht, a Government House source said.
To be eligible for the tax cuts, SMEs must have a single account.
SMEs with registered capital of up to 5 million baht and revenue of 30 million are currently subject to a tax waiver for net profit of up to 300,000.
They are taxed at 15% for amounts over 300,000 baht but not exceeding 3 million and at 20% for amounts over 3 million.
The source said the tax cut might be extended after the two-year period has lapsed if it succeeded in drawing more SMEs into the formal tax system and encouraged them to pay tax bills correctly.
A large number of SMEs are suffering from a cash crunch as their sales revenue has declined for years, hurt by pre-coup political chaos, the economic slowdown, weak domestic consumption and rising household debt, while banks have barely extended them new loans over fears of non-performing loans (NPLs).
SMEs are the second target group the new economic team led by Deputy Prime Minister Somkid Jatusripitak seeks to aid with new measures.
The new measures are part of the government's push to drive domestic consumption and investment to shield Southeast Asia's second-largest economy from China's cooling economy and global economic uncertainties.
Thailand has 2.7 million SMEs, 80% of which have never paid corporate income tax. Most tend to have more than one account -- one the actual account for internal use and another with false documentation to be submitted to the state for understating tax payments.
The Finance Ministry will propose the state-owned Thai Credit Guarantee Corporation (TCG) provide a 100-billion-baht credit guarantee covering 70% of NPLs for up to 30% of each SME borrower.
Under the credit-guarantee scheme, the TCG provides full coverage for NPLs up to 21%.
For soft loans worth 100 billion baht to be extended by the Government Savings Bank (GSB), the state-owned bank will charge commercial banks 0.1% interest and the latter will relend to SMEs at no more than 4%.
The government will subsidise 1.9% interest to the GSB to meet its cost at 2%.
The GSB will allocate 1 billion baht of the 100 billion soft loan to lend to fishing vessel owners to change equipment and buy radars to tackle illegal fishing.
Jiratchyuth Amyongka, a senior executive vice-president of CIMB Thai Bank, said the new tax measures would help to trim the expenses and increase the liquidity of SMEs.
However, he raised doubts as to whether the TCG's 100-billion-baht credit guarantee would encourage banks to extend new loans to SMEs since the guarantee would be provided on an individual basis.
Small business owners are the TCG's focus in providing credit guarantee, but their default risks are higher than medium-sized enterprises, Mr Surachai added.
