The cabinet yesterday approved a new personal income tax structure which aims to attract more high-income earners to pay tax and boost the country's competitiveness.
The new structure includes wider taxable income bands for the 30% and top tax rate 35% segments, and increases in personal and expense allowances, easing the tax burden for all taxpayers.
The new personal income tax structure will come into force in 2017.
Finance Minister Apisak Tantivorawong said the new personal income tax structure aims mainly to attract high-income earners to pay more in personal income tax.
According to Mr Apisak, currently only 20,000 of the total 10.3 million taxpayers are subject to the highest 35% rate.
He said that many high-income earners do not want to pay personal income tax as it is much higher compared with corporate tax for which the gross burden is about 28%, encouraging personal income tax evasion.
According to the new tax structure, the overall personal income tax burden, including higher allowances, of a top-rate taxpayer will be reduced to 29%, close to that of corporate income tax.
Under the new structure, the income band for the 30% bracket will be raised to 2-5 million baht from 2-4 million baht, and the new range for the top rate at 35% will start from 5 million. Income bands for 5%, 10%, 15%, 20% and 25% will remain unchanged.
Yesterday, the cabinet also approved a hike in the expense allowance cap to 50% of annual income, but not exceeding 100,000 baht, while the personal allowance will be doubled to 60,000 baht from 30,000.
Mr Apisak expects that higher expenses and personal allowances will also ease the burden for middle-income taxpayers and encourage them to spend more, enabling the government to collect more in value-added tax (VAT).
The new structure will also abolish the cap on child allowances, now limited to three kids, while the allowance per child will double to 30,000 baht from 15,000 baht.
He said the government aims to encourage Thais to have more children because of the country's ageing population.
According to Mr Apisak, the government is expected to lose about 32 billion baht in revenue from the new tax structure.
Prime Minister Prayut Chan-o-cha said the government will review all tax structures to ensure greater fairness for all stakeholders while not burdening those in the low-income bracket.
However, he said the government will find ways to widen the taxpayer base to compensate for reduced tax payments from the new structure and encourage more people to pay taxes.
Prasong Poontaneat, director-general of the Revenue Department, said many business operators requested a reduction in the personal income tax so as to be on par with the corporate tax.
Currently, the corporate tax rate is at 20% and a company is also subject to a dividend tax of another 10% of the remaining income. As a result, the gross corporate tax burden comes to 28%.
The new personal income tax structure and higher allowances will reduce the tax burden of those who have to pay the top rate of 35% to 29%. This will boost the country's competitiveness, Mr Prasong said.
The higher personal and expense allowances will also allow those who earn an income of up to 26,000 baht a month to be tax exempt, up from a monthly income of 20,000, he said.
All individual taxpayers will benefit from the new personal income tax structure, but it is hard to say which income bracket will gain the most since how much a tax bill can be reduced depends on the income base, Mr Prasong said.
A source at the Finance Ministry said the Fiscal Policy Office has brushed aside the private sector's request to directly cut the 35% top rate of personal income tax as the Revenue Department would lose a significant amount of revenue, but the ministry's think tank had agreed with the wider taxable income range instead.
