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Agency put on notice about corporate tax avoidance

Mr Somchai warned the office to keep an eye on transfer pricing.

The Finance Ministry has instructed the Revenue Department to improve tax collection efficiency and stem tax avoidance by large corporations, whose tax bills have been falling for the past several years.

Over 1,000 large companies classified under the department's Large Tax Office paid less than the tax-collecting agency's target in recent years, resulting in a failure to meet tax revenue targets. These big companies make up 70-80% of corporate income tax, said finance permanent secretary Somchai Sujjapongse.

The department blamed the corporate income tax cut to 20% from 30% in the past for lower tax revenue, but Mr Somchai is doubtful of these large companies' tax bills because the oil price is relatively lower and their product prices remained unchanged.

The department needs to analyse the returns to determine why large companies are liable for lower tax bills, he said.

Both listed and non-listed large companies typically have met accounting standards and their financial statements have been audited by auditors, but they might use some loopholes such as transfer pricing to avoid tax payment, Mr Somchai said. The department needs to be wary of the issue and tax refund fraud, he said.

Transfer pricing is the term for when a price is set between companies in the same group when buying goods and services or sharing resources.

The department has also been advised to keep an eye on some businesses that are at risk of conducting tax avoidance, Mr Somchai said without revealing the types of businesses.

"We need to be able to follow these large companies, as there are many loopholes that can be used for tax avoidance," he said. "Even in advanced countries such as the US or in Europe, tax avoidance can be spotted. We must be careful about transfer pricing practices, as they are a channel for tax avoidance."

A source at the ministry said that about 3,500 large companies with earnings of more than 2 billion baht a year are covered by the department's Large Tax Office. For the five months through February, the department collected 616 billion baht in tax revenue, missing its target by 8.42 billion or 1.3%.

But corporate income tax -- the second-largest tax income source for the department -- exceeded the target by 6.37 billion baht or 4.4% to reach 150 billion for the period.

The largest tax-collecting agency by revenue has a target for this fiscal year of 1.87 trillion baht, up 6% year-on-year.

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