Thailand’s restaurants slam plan to hike value-added tax, warning of severe inflationary impact
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The Thai restaurant industry has voiced alarm over the government’s proposal to raise the Value Added Tax.
PHOTO: AFP
BANGKOK – The Thai restaurant industry has voiced alarm over the government’s proposal to raise the Value Added Tax (VAT), warning that the move will place an excessive burden on businesses and fuel widespread inflation, severely impacting the public’s cost of living.
The government intends to gradually increase the VAT from the current 7 per cent to 8.5 per cent by 2028, and finally to 10 per cent by 2030, as part of a medium-term fiscal restructuring plan designed to reduce the budget deficit to below 3 per cent of GDP by fiscal year 2029.
Mr Sorathep Rojpotjanaruch, chairman of the Restaurant Business Club, acknowledged the need for fiscal stability but urged the Cabinet to reconsider the hike for specific sectors.
“I do not object (to the VAT increase), but I ask for a review of the implementation across specific business sectors. It could have a widespread impact on the domestic cost of living and potentially lead to high inflation, particularly in the restaurant business and consumer food products,” he said.
Double burden on restaurants
Mr Sorathep highlighted that restaurants already face a high effective VAT burden because their main cost – agricultural raw materials and fresh produce – is VAT-exempt.
This means they have minimal input VAT to deduct against the output VAT charged to customers.
“The burden of carrying VAT costs for restaurant businesses is already extremely high today,” he said, noting that other countries, particularly in Europe, often apply a lower, differentiated VAT rate for food and restaurants to protect consumers and consumption.
The proposal is to maintain the existing 7 per cent VAT rate specifically for the restaurant sector, food items, and the tourism and accommodation industries to mitigate damage to both domestic consumers and foreign visitors.
Wider fiscal restructure
The VAT hike is one part of a broader fiscal plan approved by the Cabinet on Nov 18. Other measures to increase government revenue include:
Fuel Tax: Raising the tax rate on petrol and diesel by 1 baht (S$0.04) per litre in 2027
Import Duties: Collecting import duties on goods valued under 1,500 baht
Income Tax: Restructuring personal income tax and reviewing existing deductions
State Revenue: Increasing the revenue submission rate of certain state enterprises by 5 per cent
While the government plans to implement “mitigation measures” alongside the VAT increase to ensure a smooth transition, industry experts remain concerned that the structural tax shift will ultimately be passed on to the consumer, stifling economic recovery.
The overall goal of the plan is to increase total state revenue to 15.1 per cent of GDP while reducing government expenditure to around 18 per cent of GDP, thereby strengthening the nation’s financial structure amid volatile global conditions. THE NATION/ASIA NEWS NETWORK
