Tax income almost four percent short of target

The Fiscal Policy Office (FPO) recently announced that the military-installed government had missed its revenue target by almost four percent for the first nine months of fiscal 2015, due primarily to the sluggish economy.

Between the October 2014 start of the fiscal year and the end of June, a total of 1.63 trillion baht was raised, which meant the shortfall in what had been planned for amounted to 65.5 billion baht or 3.9 percent. That said, the figure showed a 5.3 percent increase over the previous fiscal year, so it may be that the original budgetary plan was somewhat ambitious to begin with.

The chief areas where the shortfalls were felt were in corporate income tax collections, which were down by 14.7 percent, automobile excise tax, which was under by 22.3 percent, and petrol tax, which fell 7.3 percent short of target.

With demand for new cars still fairly slow, excise tax on automobiles is not likely to recover to the point aimed for by the government.

Domestic car sales between January and May dropped 16 percent year-on-year to 308,787 units. The Federation of Thai Industries has already forecast an expected drop to 850,000 vehicles this year, an overall fall of 3.6 percent.

Basically, the new car market is still dealing with the long-term effects of the ousted Yingluck Shinawatra government’s first-car buyer scheme.

Revenue from beer and other liquor taxes was also down, with beer down by 6.28 billion baht (or 9.2 percent) and other liquor by 5.89 billion baht, or 10.8 percent. It seems as though the economic slowdown has not lead to an increase in the consumption of alcohol.

While the hope remains that GDP growth will still reach three percent, poor export data, tepid private investment, high household debt and a generally sluggish world economy are not helping the overall economic outlook for Thailand.

Yet the Finance Ministry has already admitted that the three percent GDP growth figure is going to be a challenge. Second half growth is expected to come in at around 2.6 percent, which is softer than the first half.

The FPO has recognized the potential shortfall and was predicted to cut its 2015 growth forecast of 3.7 percent around the time this issue went to press.

One of the poor performing areas for the FPO has been with value-added tax (VAT) which fell 7.3 percent below its target for the first nine months of the fiscal year. This was due primarily to a 17 percent shortfall on VAT for imported goods.