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ResourcesCorporate and Tax AdvisoryThailand Tax LawCould the Value Added Tax (VAT) Rate Increase in Thailand?

Could the Value Added Tax (VAT) Rate Increase in Thailand?

Transcript of the above video: 

As the title of this video suggests, we are discussing VAT in Thailand. We are discussing the possibility that it could rise. It could go up, it could increase. For those who are unaware, currently the VAT rate, and this is like General Sales Tax, for people in America it is an unknown thing but think of it as a sales tax, a 7% Value Added Tax on pretty much everything in Thailand although there are exceptions and I made videos on exceptions to VAT in the past. 

Long story short, VAT is currently 7%; that is what the prevailing VAT is. That said, and I have done another video on this channel, that isn't actually the standard rate. The standard rate is 10%; that is what it was enacted at and they have provisionally continued to, on a "temporary basis" maintain a 7% rate rather than 10.

In a recent article though from the Bangkok Post,, the article is titled: Government Spends its Way into Trouble. It is by Chartchai Parasuk, and I read a lot of this gentleman's articles. He is very insightful on economic matters but a recent article that he wrote had this excerpt that I thought was useful for folks to talk about things in a tax context. Quoting directly: "The current 7% VAT rate is only "temporary". Therefore, an increase in VAT up to 10% does not require Parliamentary approval. Third, the Government could cut unnecessary expenses. Unfortunately there is not much room to cut as current expenditure like salary and compensation accounts for 76.5% of the total budget while capital spending is only 20.5% of total budget. Any meaningful budget cut will mean salary cuts and layoffs, another NO for the government." 

I thought this was interesting because he is doing an overall analysis; I am just pulling out a little thread here. He is doing an overall analysis of possible budgetary and fiscal policy moves that could be made in Thailand. There are issues with respect to this because obviously tax revenue is way down; tourism is way, way off here in Thailand but again just to re-quote the pertinent part of this: "The current 7% VAT rate is only "temporary". Therefore, an increase of VAT up to 10% does not require Parliamentary approval. Again for folks that want to actually dive into this,, The Government Spends its Way into Trouble

So the thing to take away from that is and he goes into why he doesn't think that will happen. I don't necessarily think it will either but I do think if anything was going to happen with respect to possible rises in taxation here in Thailand, I would bet that that would be the first one because it doesn't require parliamentary approval. It can just be done in the negative. For example, in the United States we have what is called a "pocket veto" so if Congress goes out of session on certain types of laws, if the President hasn't acted before the Congress goes out of session, the law may effectively die so you can do what is called a "pocket veto". He just puts it in his pocket and forgets about it and doesn't have to make any affirmative move. He just forgets to sign that or intentionally forgets to sign that, and it does not become law. In this case in a sense, they could raise taxes in a kind of a pocket manner. Instead of signing the next document that approves the temporary or provisional keeping of the 7% VAT, whoever the relevant authority is, presumably the Prime Minister I guess, could just not sign that and that would result in the 7% reverting to the standard, which is what was initially passed; 10% VAT. That could have a substantial impact on taxes here in Thailand. Again do I think it is overly likely? Probably not. There would be tremendous political ramifications to that but it is definitely possible and I would say compared to other options with respect to raising of taxes in Thailand, it is one of the ones I would not put way outside the realm of possibility. I don't think it is overly likely but I think it is more likely than a lot of other things coming to pass.