Working panel to review taxation fairness

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Working panel to review taxation fairness

The Revenue Department has established a working panel to conduct a survey aimed at finding out which group of taxpayers benefits the most from the current list of 20 tax deductions and allowances within the personal income tax regime. The aim of the survey is to use the results from it as part of an overall plan to review all aspects of the income tax scale and hopefully come up with a potentially fairer system for all taxpayers.

One of the major areas to be looked at will be a review of the tax deductions which apply to investments in long-term equity funds (LTFs) and retirement mutual funds (RMFs). Both LTFs and RMFs are used extensively to reduce the levels of personal taxable income by many people on relatively substantial salaries.

Taxpayers who invest in LTFs and RMFs can claim up to 500,000 baht in tax deductions from their annual income for each of these schemes per year. They can deduct contributions of up to 15 percent of their annual income, or 500,000 baht, whichever is the lower, for investment in LTFs and in RMFs. So, a taxpayer can reduce his or her personal tax burden by up to one million baht per year by using these two investment vehicles.

Money invested in LTFs must be held for a minimum of five calendar years, while money invested in RMFs can only be redeemed when the taxpayer reaches 55 years of age.

While it is unlikely there will be real changes to the RMFs scheme, the LTFs scheme will almost certainly be overhauled. The tax privilege for LTFs are scheduled to end in 2016. The scheme has come under fire because some LTF investors have effectively reduced the five calendar year timeline to just over three years by placing the tax deductible funds into the scheme at the end of one year and redeeming those funds at the start of the fifth year. This has led the Finance Ministry to state LTFs used in this way are not long-term investments.

The Revenue Department considers the LTFs scheme an efficient means of saving, but recognizes they need to review the way the system is set up.

The overall intention of the personal taxation review is to find ways to allow more low-income earners to benefit from any adjustments in tax deductions and allowances.

Naturally, the Revenue Department will take into consideration the overall impact the survey and its findings may have on tax revenue.

The Finance Ministry recently readjusted the target for the Revenue Department for this fiscal year, lowering it by 160 billion baht to 1.81 trillion baht. This is due to lower oil prices, a decline in import duties and falling revenues from major companies.

 

 

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