Panel urges extension of current rates

The Joint Standing Committee on Commerce, Industry and Banking has proposed the government extend the current rates of value-added tax (VAT) and corporate and personal income tax to ease businesses' burden and prevent a further weakening of domestic consumption.

The proposal is expected to be submitted to the caretaker government in the coming days, Suphan Mongkulsuthee, chairman of the Federation of Thai Industries (FTI), said after the committee's monthly meeting on Tuesday.

The current VAT of 7% will expire at the end of September, with the rate rising to 10% if the government does not approve an extension.

The Joint Standing Committee has requested a two-year extension of the 7% VAT.

The panel also prefers to maintain the current personal and corporate tax rates, which expire at the end of this year.

With its caretaker status, the Yingluck Shinawatra government must seek an endorsement from the Election Commission to extend the tax rates. Otherwise, it would breach the law barring a caretaker government from saddling the next administration with new obligations.

The current rates for personal and corporate income tax were temporarily slashed by Ms Yingluck's government as part of its domestic stimulus package.

The corporate income tax rate fell to 23% in 2012 and 20% last year and this year from the 30% regular rate.

Personal income tax rates were cut to 5% from 10% for the lowest bracket and to 35% from 37% for the top bracket.

With the spate of negative economic readings on private investment, domestic consumption, manufacturing, exports and tourism in the first three months, tax hikes could further dampen spending, Mr Suphan said.

The private sector says Thailand's economic growth will remain under pressure as long as the ongoing political crisis persists.

The FTI predicts gross domestic product (GDP) growth of 2.5% to 3% this year if the deadlock is solved by a new general election to be held in July.

If the political turmoil extends to year's end, GDP is expected to grow by 1-2%.

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