Civil servants in for 7-8% rise

State officials' base salaries will be raised by 7-8% on average, with the increase expected to take effect next April, says finance permanent secretary Rungson Sriworasat.

The planned rise is aimed at helping civil servants to cope with the rising cost of living and discouraging them from taking tea money.

The increase is expected to cost the government an extra 40 billion baht a year, Mr Rungson said.

However, the cost to the state would be only 20 billion baht in fiscal 2015, as the pay hike will emerge in the second half.

Thailand's fiscal year runs from Oct 1 to Sept 30.

Low-ranking officials will receive a higher-percentage rise than those of higher ranking, he said, adding that their cost-of-living allowance would also be increased by a third to 2,000 baht a month.

Kritsada Jinavijarana, director-general of the Fiscal Policy Office, said the 7-8% increase in base salary was in fact only one to two percentage points higher than the regular annual increase of 6%.

Every percentage point increase in government officials' salary base boosts GDP by 0.03 percentage points, he said.

Mr Kritsada said the salary hike would also have an insignificant effect on inflation.

He estimates an inflation rate of only 2.59% if the rise is one additional percentage point and 2.68% if two extra points.

Each of the extra percentage points will cost the government 5.8 billion baht.

Separately, Mr Rungson said the Finance Ministry was considering a corporate income tax exemption for more than the standard eight years to those investing in the five special economic zones (SEZs) approved by the ruling National Council for Peace and Order.

The new SEZs are meant to boost border trade and alleviate the problem of labourers from neighbouring countries concentrating in major cities.

The five are in Tak's Mae Sot district, Sa Kaeo's Aranyaprathet district, Trat's Khlong Yai district, Mukdahan's Muang district and Songkhla's Sadao district.

Mr Rungson said investors in these SEZs would receive more tax incentive than those under Zone 3 of the Board of Investment (BoI).

At present, investors in Zone 3 are exempted from paying corporate income tax payment for eight years.

Mr Rungson said his ministry might allow investors in the new SEZs to receive the tax exemption for an additional three to five years.

He said the BoI should also revise tax incentive criteria by offering privileges to technology and other knowledge-based industries the country needs.

Incentives should not focus too much on taxes, as Thailand needs tax revenue for the 2.4-trillion-baht infrastructure projects, Mr Rungson said.

He said the country's economic recovery could accelerate in the second half of this year, bringing full-year growth to not less than 2%.

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