Personal Income Tax may be restructured

The director-general of the Revenue Department recently announced the details of four adjustments concerning changes to the personal income tax regime which had been handed to the Finance Minister for his consideration and the consideration of the government.

The key adjustment involves bringing the highest personal income tax rate down from its present 35 percent to around 28 percent, to bring it into line with the current highest rate of corporate income and withholding tax.

The Revenue Department did note, however, that corporate tax has a single rate, while personal income tax is broken down across seven brackets.

The plan is to try and make changes which will benefit low and middle income earners but also ensure fairness to those who pay the top rate of income tax at present.

Allowable deductions for expenses, as well as raising the maximum child allowance from three, are also on the agenda for reform.

Families at present only receive child allowance for a maximum of three offspring, but the Revenue Department believes lifting this restriction may encourage a baby boom.

Another potential change concerns the level of annual expenses. At present the maximum allowable is 60,000 baht per year, but this may be raised to around 100,000 or even 120,000 baht a year.

Personal income tax presently has more allowable deductions than corporate tax. Among permissible deductions are life insurance premiums, interest on mortgages and investments in long-term equity funds and retirement mutual funds.

The seven personal income tax brackets at present are 150,001 to 300,000 baht income per annum is charged at five percent; 300,001 to 500,000 baht is at a 10 percent rate; 500,001 to 750,000 stands at 15 percent; 750,001 to one million baht is 20 percent; 1,000,001 to two million baht is 25 percent; 2,000,001 to four million baht is at a 30 percent rate and from 4,000,001 baht up is taxed at 35 percent.

The tax-free threshold is up to 150,000 baht per annum and the Revenue Department noted that of the 10.9 million people who submitted tax returns in 2014, 6.4 million were exempted because their incomes were too low.

The largest taxpaying group according to the Department was 1.63 million people, all within the 150,001 to 300,000 baht a year bracket, and therefore subject to five percent tax.

Only 24,700 people, in 2014, submitted tax returns declaring earnings of four million baht or greater.

If the proposals and adjustments pass through the Cabinet and the National Legislative Assembly, then the changes would come into force at the very beginning of 2017.