BANGKOK (THE NATION/ASIA NEWS NETWORK) - Prior governments tried and failed to revamp the tax regime, allowing challenges to mount.
The National Legislative Assembly is working on a crucial Bill that will open a new chapter in the way taxes are collected on land and buildings in Thailand.
The proposed legislation will replace the existing but outdated law on property taxation while boosting revenues for local administrative units.
From farmland, commercial and industrial properties to private homes and unused land plots, the Bill will pave the way for a more sensible tax regime at a time when the country's tax collection is approaching multiple challenges.
On one hand, import duties and other related taxes have played a much lesser role in generating government revenue due to decades of trade and investment liberalisation, as well as free trade agreements with foreign countries.
On the other hand, the government in recent years has turned to cutting corporate and personal income tax rates in hope of stimulating more private investment and personal consumption.
Meanwhile, the effective value-added tax (VAT) rate has remained unchanged at 7 per cent for the past several years because governments fear a consumer backlash, even though the VAT ceiling is 10 per cent.
When it comes to a tax hike, most governments prefer a higher rate on the so-called "sin tax" covering alcoholic beverages and cigarettes because there is little, if any, opposition.
Overall, the country seems to have nearly exhausted its avenues for more taxes on income and consumption, two of the biggest sources of tax revenue, whereas government expenditures tend to rise constantly due to higher spending on infrastructure, healthcare, education and the like.
Meanwhile, as the country's population moves closer to the advanced stage of an ageing society, in which a growing percentage of Thais will be 60 or older, healthcare bills will skyrocket.
New sources of tax revenue ought to be explored.
In this context, the proposed land and building legislation offers huge potential, given that Thailand's tax regime is short on property ownership and utilisation.
There are, for example, countless properties across the nation that are unused or underused. Unlocking the potential of these properties would advance the country's economic interests.
To do so, a progressive tax rate is required to encourage idle landlords to make use of their properties, sell them, or face a rising tax liability over the course of several years.
This would help redistribute wealth and improve the economics of land utilisation, at the same time boosting the property-development sector, since the cost of land is expected to decrease slightly as a result of this new legislation.
The proposed law also levies a significant, albeit relatively low, tax rate on the primary homes of wealthy people where their appraised value exceeds Thai baht 20 million (S$821,000).
All commercial and industrial properties will also be subject to slightly higher tax rates compared to the current rates, but there is room for further adjustment of all rates in the future, since the ceiling rates are significantly higher.
Overall, such a land and building tax code is long overdue, since Thailand previously depended on other kinds of tax revenues to finance the country's national development.
Previous elected governments attempted to enact new land and building legislation, but they never succeeded.
Members of the current law-making assembly have a duty to carry out this extraordinary mission to prove they have no vested interests as far as land and property ownership is concerned.
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