The cabinet on Tuesday approved the draft bill for the long-awaited land and buildings tax, intended to narrow economic disparity, after a review by the Council of State.
Nathporn Chatusripitak, an adviser to Prime Minister's Office Minister Suvit Maesincee, said the draft bill amended by the Council of State is slightly different from the version proposed earlier by the Finance Ministry, as the tax rate for unused or vacant land was tweaked to 2% for the base tax year. That rate is subject to increase by 0.5 percentage points every three years until it is capped at 5%.
The change is aimed at prompting landlords to use their land, as the incremental tax rate will take some time to hit the ceiling.
In the previous draft of the bill, a 1% tax was imposed on land left vacant or unused for one to three years, 2% for four to six years and 3% for more than seven years, up to a maximum of 5%.
The government had decided last November to postpone enforcement of the land and buildings tax for one year after the Council of State expressed a different view on the taxation of unused land.
The categories of land under the draft bill were another issue on which the council disagreed with the Finance Ministry's proposal.
After the cabinet's approval of the draft, Mr Nathporn said the bill is to be forwarded to the National Legislative Assembly, which will deliberate it for 2-3 months.
"As it stands, Prime Minister Prayut Chan-o-cha himself wants the land and buildings tax to be enforced as soon as possible to reduce income disparity," he said.
The new property tax is aimed at narrowing the wealth gap, expanding the national taxpayer base, increasing tax income for local administrations and improving land use nationwide.
Once in effect, the tax will be levied on first homes and land used for agricultural purposes with appraisal prices starting at 50 million baht. The rate will be applied to land value exceeding 50 million baht.
The tax will also apply to second homes on a progressive basis, from 0.03% to 0.30%.
The land and buildings tax is to replace the house and land tax and the local development tax, which have drawn criticism for being regressive and outdated.
Deputy Finance Minister Wisudhi Srisuphan said the land and buildings tax will be paid every April, with the first payments due in April 2019 if the law is enforced as planned, in January 2018.
Mr Wisudhi said the tax will not be a financial burden for those owning one home or using land for agricultural purposes, as the tax will be applied to high-value land.
Those in the above two categories account for 90% of total land owners, he said, adding that roughly 90% of land and buildings tax income will derive from land for industrial and commercial use.
Cabinet also gave the go-ahead for the Industrial Estate Authority of Thailand (IEAT) to set up an industrial estate in Sa Kaeo's special economic zone, which spans 600 rai in tambon Pa Rai, Aranyaprathet district.
The project is estimated to cost 1.66 billion baht.
Land development is expected to conclude in 15 months, with the targeted industries including agro-business, logistics, packaging and plastics, auto parts, machinery, electrical appliances and electronic parts.
Mr Nathporn said the IEAT aims to sell the developed land over the next five years.
Ministers also approved the "SME transformation" soft-loan programme worth 15 billion baht, which is intended to help enhance and transform Thai SMEs so that they will be strong enough to expand abroad.
The soft-loan package will be extended via the state-owned Small and Medium Enterprise Development Bank of Thailand, through which the government will help subsidise 2.25 billion baht in interest.
SMEs are eligible to borrow up to 15 million baht each.