Proposed Inheritance and Gift Tax levy aimed at narrowing income disparity
A new inheritance and gift tax levy is expected to be approved by the cabinet well before the end of this year with the legislation, if passed, expected to take effect from the new financial year 2015.
The current draft proposal sets a levy at a minimum of 10 percent which should enable future rises without the need for an amendment to the law, according to Sommai Phasee, the Minister of Finance.
The aim of the inheritance and gift tax levy is one of a number of measures being considered by the government to reduce the levels of income disparity in Thailand. According to some reports, the proposed legislation is already leading to many wealthy people taking measures to transfer much of their assets and wealth to their heirs to avoid being forced to pay the tax once it becomes law.
The current proposal kicks in at 10 percent only when an amount valued at 50 million baht or more is intended to be passed down. The Finance Minister noted that the present draft has the rate written in a rigid manner but he is expecting the law to be written in such a way as to allow rate hikes by way of issuing subordinate legislation.
The Council of State has been reviewing the draft legislation and will be handing the draft back to the Finance Ministry with further proposals aimed at closing any obvious tax loopholes, although the history of any kind of taxation measure, worldwide, usually shows that good accountants can soon find loopholes to help clients reduce or completely avoid having to pay funds to governments.
The Council of State, for example, has already spotted a loophole in terms of the use of nominees to receive inheritance, but this, obviously, will be closed.
The draft legislation recognizes that an inheritance or gift tax can be difficult to pay in a single installment and so beneficiaries will be allowed to pay the taxes due over a period of time to ease the potential financial burden.
The Finance Minister has said that after the inheritance and gift tax, a land and buildings tax will be the focus of the next big push to add revenue to the government’s coffers. There are 23 million land plots across the nation which will need to be assessed by the Treasury Department. So far, around seven million plots have been assessed.
The Fiscal Policy Office has proposed a ceiling rate of four percent for unused land and land for commercial use while agricultural land will be set at 0.5 percent. The tax is set to replace house and land and local development taxes, with low-priced residences and land likely to receive a waiver.