Wage hike relief measures approved by cabinet

The cabinet has approved tax relief proposals for small- and medium-enterprises (SMEs) affected by the increase in the nationwide minimum daily wage to 300 baht, which took effect on Jan 1.

The measures are aimed at helping SMEs with annual revenue not exceeding 50 million baht a year, and were proposed by the Finance Ministry after an approach by the private sector.

Revenue Department chief Sathit Rangkasiri said the measures include raising the income tax exemption limit for SMEs from 150,000 baht to 300,000 baht a year. SMEs declaring income between 300,000 and one million baht will be taxed at 15% and those with over one million baht profit will pay tax at 20% on the difference.

The withholding tax for SMEs will also be cut to 2% from 3%, and they will be allowed to claim depreciation on  machinery of 100% in the first year of purchase until the end of 2013, an extension of one year from the end of 2012. 

It is estimated that the measures will cut tax revenue by about 2.8 billion baht.

Prime Minister Yingluck Shinawatra insisted on Tuesday the wage hike policy was not the only factor forcing SMEs to shut down.

She said governent agencies such as the Ministry of Industry and the Ministry of Commerce will look into other reasons for factory closures and look to additional measures to assist SMEs.

Prime Minister Yingluck Shinawatra (Photo by Pattanapong Hirunard)

"The wage increase is beneficial for workers, giving them enough income for their daily living costs," Ms Yingluck said. "In the long-run, domestic consumption will substantially increase on the back of the  higher purchasing power of workers." 

In the first stage, the government will monitor the impact of this policy on SMEs and help them adjust, she said. 

In the long run, the government will find ways to help them improve income and stay competitive in the world market, rather than focusing on cost reduction, she said.

In Ayutthaya a spokesman  for some factories said the new minimum wage policy does more harm than good.

Veerachai Jaorakroengsaen, a recruiter for the industrial sector in Ayutthaya, said the government should never have implemented the policy without a referendum. 

From years working with immigrant labour, Mr Veerachai said, he believed that the minimum wage increase will certainly put Thailand out of business.

He argued that the daily minimum pay should not be as high as 300 baht and the country should definitely not have just one rate for the whole country.

When added to the affects of the 2011 floodings, the wage policy could well drive many foreign manufacturers from Thailand, he said.

Skilled Thai workers were no longer required as they could be replaced by new technology and equipment. Many of foreign firms were now considering relocating to neighbouring countries, as a more attractive investment environment.

"The female workforce is most likely to be out of a job because most of industries which require their skills, such as garment, electronics and jewellery, are leaving the country, while most of the industries that remain in the country such as car and auto part manufacturing prefer male workers," Mr Veerachai said.

Due to the high daily wage, many employers may choose to hire staff on a contractual basis through employment placement agencies. With the same rate countrywide, it will be much more difficult for industries in Ayutthaya for example, where there are many industrial estates, to recruit workers as they were likely to stay in their home provinces.

After the formation of the Asean Economic Community (AEC) at the end of 2015, immigrant workers who usually have unskilled jobs would start moving up to factory jobs, replacing Thai workers, he said.

Ekachai Rakprasit, another recruiter, said many manufacturers shutdown  after the flood in 2011 and more were expected to suffer the same fate because of the 300 baht wage policy.

His firm was suffering, with business down 50%, and most factories demand only male workers. He believed  the wage increase would mean a higher cost of living.

Kannikar Jamroonhin, 26, a Loei woman who works as an electronic component packer, complained that she was being hurt by the wage hike as the company had cut overtime work. With the old minimum wage rate, she earned 440 baht a day with overtime. However, with the new rate, she is making only 300 baht per day due to no overtime. 

Ms Kannikar is looking for a new job but  agreed it may be difficult to find one.

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