Encouraging innovation by way of tax breaks
The military-installed government is well aware of the need for businesses across Thailand to find ways and means of being more competitive within the Southeast Asian region and worldwide, and to that end has established tax incentives to help push research and development.
In January, the government signed off on a range of tax incentives which are designed to give the private sector the kind of encouragement it needs to push ahead with innovations.
Private equity funds which invest in innovation-related businesses are also being given dividend and capital gains tax waivers, with the aim of encouraging this part of the financial sector to invest in these types of businesses.
One key tax break is to allow private companies tax deductions of up to twice their annual revenue to offset the costs of investing in research and development projects. By their very nature, research and development operations can often end in relative failure. Nonetheless, it is important for Thai companies to be encouraged to engage in finding new and innovative ways to promote their products and the government believes the long-term advantages should far outweigh the short-term hit to the taxation budget.
The government is also allowing the private sector to take advantage of the promotional privileges from the Board of Investment (BoI) on a company by company basis.
The cabinet recently approved tax deductions of up to three times their annual revenue for private companies which chose to invest in their own research and development.
The government has also said it will contribute 500 million baht in seed money to establish an innovation fund that will invest in private equity funds which engage in research and development.
A panel from the National Science and Technology Development Agency (NSTDA) has been set up to work out the finer details of the innovation seed fund.
State agencies are currently required to purchase between 10 and 30 percent of their products from Thai companies each year.
In more practical terms, the government has approved a development plan for Thailand to become an electronic vehicle (EV) manufacturing hub, with a prototype of the country’s first EV expected to be rolled out later this year.
The Industry Ministry has also launched 70 projects aimed at helping small to medium enterprises (SMEs) to develop innovative products. Once developed, the Industry Ministry then offers way to help businesses commercialise these products in a way to add further value to them.
The government has said it wants to promote innovative products in eight specific areas, including food, agricultural products and fashion.