Blase about tax laws

It's an old saying _ nothing is certain except death and taxes. Alas, it seems that Thailand may very well be an exception, at least so far as taxes go.

I'm still a bit stunned about how easy the tax code treats celebrities, actors and entertainers, and how blase actress Chermarn Boonyasak seems to be about a fundamental duty of all citizens in the country.

To recap, Chermarn, better known as Ploy, last month had a public falling out with an event organiser on Facebook, posting that the company, Absolute For You, had failed to pay a 150,000-baht appearance fee.

She claimed that the company withheld 3% from her payment, and alleged that the understanding was that the appearance fee was separate from any tax liability.

But the company said the 3% withholding fee was made based on Chermarn's own information given to the firm, which called for making the payment to a 77-year-old man.

In fact, 5% should have been withheld under the law, but Absolute For You withheld just 3%, arguing that they calculated the fee based on the information provided.

Needless to say, the public outcry has been vocal and virulent, with many expressing outrage not just for Chermarn's questionable tax management practices, but also the very question on why entertainers should be subject to such a low tax rate in the first place.

After all, the large majority of people paying personal income tax are subject to withholding based on their existing tax bracket, with deductions and exemptions occurring much later when annual tax returns are filed. What disturbs me more is that Chermarn _ who for many represents an idol of sorts _ appears to have a questionable attitude towards the concept of civil duty.

Yes, she has since recanted, apologised and sworn to implement changes in her tax dealings. But first impressions are important.

It's interesting how different this case is to another recent episode involving a Thai celebrity. Nichkhun Horvejkul, a Thai-American member of the Korean boy band 2PM, was arrested in July for drink driving. He has been forced to all but ban himself from the public eye due to a massive backlash and apologise to his Korean fans.

It's clear that Korean society has a high degree of respect for the law. Consider that even Nichkhun's own family's posts to their son, urging him to stay strong amid his adversity, came under heavy attack from Koreans who took umbrage at the perception that the pop star and his family lacked true regret for actions and for the damage caused. I don't see many Thai stars banning themselves in contrition for their mistakes.

Finance Minister Kittiratt Na-Ranong, when asked about Thailand's tax system, said Thais are quite good at evading taxes.

It may be difficult to estimate how good. But consider that the Revenue Department has estimated that it could double the country's annual tax revenues within the next three or four years simply through more efficient tax collection and database systems tracking financial transactions through the economy.

This would push annual tax revenues to as much as 3 trillion baht per year, giving the state ample room to invest in new roads, schools, hospitals and social welfare programmes.

But I am uncertain whether increased enforcement alone is sufficient, considering the current mentality by many taxpayers, particularly small companies, that evading taxes is simply a game which must be played to stay competitive. After all, if one's neighbours cheat, why shouldn't I?

It remains to be seen whether Mr Kittiratt's policy to cut tax rates succeeds in encouraging companies to comply with the law. Corporate taxes, held at 30% for years, have fallen to 23% this year and are set to drop to 20% in 2013 under the policy aimed primarily to help Thai companies better compete with other countries in the region, but also to partly reduce the financial incentives for violating the tax laws.

A costly gamble for sure, considering that the tax cut has already cost the government 50 billion baht in corporate taxes this year alone. Honest businesses no doubt welcome the policy. For the dishonest however, paying 20% in tax still is higher than paying nothing.

Hope for the best, but prepare for the worst. I hope the government does approve the modest requests by Satit Rungkasiri, the director-general of the Revenue Department, to approve 2 billion baht in new IT investments to help strengthen its enforcement capabilities. Hoping that the public respects the law without fear of penalty is overoptimistic, utopian and simply foolish.

The rule of law will only have meaning if politicians, celebrities, business leaders and ordinary workers are all treated equally within society, as Thai citizens each with similar responsibilities to the country.

Wichit Chantanusornsiri is a senior business reporter.

Share your thoughts

Discussion 1 : 19/09/2012 at 12:36 AM
With all the corruption & money wastage, I wonder how long before the Venice of Asia becomes the Greece of Asia.
Discussion 2 : 13/09/2012 at 04:36 PM
Even the government gave rich corporate owners lower tax. What does that say about the society? PT should never have cut corporate tax, the debt they took on is in the hundreds of billions while tax revenue is decreasing from corporate businesses. Doesn't make sense.
Discussion 3 : 13/09/2012 at 02:13 PM
lungstib, DS #21 asks "How do you tax corruption?" First; confiscate all the assets of the corrupt people. Second; Auction off those assets and put those revenues in the state coffers. Third; fine those corrupt people and send them off to prison to make wood furniture that they can sell on the outside to pay their fines and back taxes. But it would take a determined and honest government to bring about these suggestions, which probably won't happen in this millenium.
Discussion 4 : 13/09/2012 at 01:13 PM
Its a system that fails all the way from the top down. People with 10,000b a month jobs pay little tax even if they have 3 houses and 10 cars. How do you tax corruption?
Discussion 5 : 13/09/2012 at 01:07 PM
Why is tax evasion news? Thais will never pay what they truly owe, that's why past KIngs brought in Indians to collect taxes because they knew the tax money would be stolen by thai collectors.
Discussion 6 : 13/09/2012 at 12:44 PM
@Disc. 16: What I was attempting to point out was a method of reforming the income distribution system and closing the massive wealth gap that exists in Thailand thus allowing the poorest to benefit, in fact a sort of Robin Hood tax. The French 75% tax on the super rich is more of an austerity measure than a socialism thing.
Discussion 7 : 13/09/2012 at 12:30 PM
Dis 2 Robin, that would be the best for all honest taxpayers who never see anything done with their hard earned money. Now an example of a rare tax cheating case. My company paid 10 months of my salary last year, but on the tax declaration it claimed that it paid 12 months salary. So I actually paid tax for 2 salaries I did not receive and wonder if I can get it back? Seeing Ploy crying crocodile's tears make me very sad..
Discussion 8 : 13/09/2012 at 11:59 AM
On the subject of taxes,.....I'm curious to know if these elected PT members of parliament are deducting their air ticket expenses ( as business expenses ) when they fly to Dubai or Hong Kong? If they are given those air tickets free by the 'fugitive' then they are receiving a 'free gift' which must be declared. If not declared then they are in violation of their oath and the Code of Conduct. It'd be easy to find out if the PACC were to check their passports and ask to see their travel expense receipts if they've travelled to Dubai. No dual standards, remember?
Discussion 9 : 13/09/2012 at 11:40 AM
@ Discussion 5. Maybe because that 75% tax is essentially socialism. Some people are wealthy through intelligence and hard work and deserve what they have earned, although a higher inheritance tax might make sense for all countries. Often it's the children of the wealthy who did nothing to deserve their fortune and power who are useless burdens to society.
Discussion 10 : 13/09/2012 at 11:17 AM
If the tax department official are the one on their own are acting as tax consultant helping companies and unusual rich personnel doing the tax evasion. On those honest individual and companies are fine comb to fine faults to penalize. It will only resolve with fair, honest, transparent and accountability before it can achieve good results. It will have to begin from the roots of the issue. Clean, Transparent and Accountability Goverment.
Discussion 11 : 13/09/2012 at 11:08 AM
pete If you think the french tax code is "a dream" I'd suggest it's more like nightmare, totally destructive and idiotically complex and overly socialistic. NOT a good example for Thailand, or any other country for that matter, to follow.
Discussion 12 : 13/09/2012 at 10:02 AM
"only just recently,he got away with a huge tax bill 12 billion,supposingly the time period expired,how can this be so" Must have missed this. When did this joke happen?
Discussion 13 : 13/09/2012 at 08:19 AM
how do you expect people to pay their taxes,when the former PM takesin never payed ,only just recently,he got away with a huge tax bill 12 billion,supposingly the time period expired,how can this be so, should incure penalties,but why does a unually wealthy person do this,greed and more greed,it was the beggining of his downfall when he hadnt paid any taxes,so they investigated and uncovered many unexplained deals ,no the country losses out but more importantly the weak,rhe older and the kids
Discussion 14 : 13/09/2012 at 07:53 AM
"Sorry" a word used by many in high positions and influence or in politics as just a word they don't really mean. To them it is just lip service..."Say I'm sorry, and go back to business as usual".
Discussion 15 : 13/09/2012 at 07:51 AM
"This would push annual tax revenues to as much as 3 trillion baht per year, giving the state ample room to invest in new roads, schools, hospitals and social welfare programmes." As corrupt as it is, I don't know why "they" aren't lining up in droves. Pay a little now, get a big piece of that 3 trillion baht pie later. Oh and you can forget about seeing any of that money going to new roads, hospitals, social welfare (now that is a play on words if ever there was one) and schools will definitely be the last to ever see a satong.
Discussion 16 : 13/09/2012 at 07:43 AM
I think the greedy rich and the coveting poor are equally culpable. Where are the superrich and super kind & generous like Bill Gates, Warren Buffett, and those like them in Thailand?
Discussion 17 : 13/09/2012 at 07:19 AM
According to an earlier article here, about 5 million Thais pay any significant income tax. About 5 million also pay absolutely no tax at all, other than the VAT on the toothpaste they use (to quote an academic), since they exist almost entirely in the informal sector. For decades there has been a controversial suggestion (internationally) that voters get a 'vote weight' based on their tax bracket. Corporate tax is the only thing keeping the treasury coffers full and now it's being reduced by a third (it is quite high, higher than the UK). So, in a way, all those factory workers are contributing to a corporate profit where a third ends up financing their populist policy. Now that is being denied. For sure, dodging tax is a national sport here, but you can't blame them given how much it is misspent.
Discussion 18 : 13/09/2012 at 07:09 AM
An interesting feature of Thai tax law seems to allow a business to re register in a new name and become exempt from tax liabilities. from iPhone application.
Discussion 19 : 13/09/2012 at 06:50 AM
When the example is for the POM of the country to not pay tax, why should anyone else think they have to? Change comes from the top down. Perhaps the Shinawatra family should consider the riches they've made off of Thailand and pay some tax occasionally.
Discussion 20 : 13/09/2012 at 06:22 AM
Why doesn’t the government propose a wealth tax of say 75% like the French have done on their rich people? Also a property tax on the rich, capital gains tax and a tax on investments in real estate, then investigate tax evasion and prohibit all Thai banks from transferring large sums of money offshore. Oh, but just a minute, the elite and politicians who run the country would be the most affected so it’s a no go. I must have been dreaming!
Discussion 21 : 13/09/2012 at 06:15 AM
When so many people idolize an on the run convict,and whose entire family has a history of tax evasion, do you really think any laws will have UDD/ red shirt/PT backers lining up to pay taxes
Discussion 22 : 13/09/2012 at 06:13 AM
How many street vendors have business licenses and how many pay taxes. Correct. None.
Discussion 23 : 13/09/2012 at 06:03 AM
The best way to get just tax reform is to make filing a tax return a prerequisite for voting, make voter registration part of the tax return paperwork. With 66 million people, last I heard only about 9 million returns are filed in Thailand. That would be true democracy, with only the people who obey the law by filing a return and work to financially support the Government deciding who should be elected and how their money should be spent. Though, I doubt very much if the PTP will like that idea.
Discussion 24 : 13/09/2012 at 05:01 AM
Who is treated equally within Thai society ? Its certainly not your average wage earner. They are neither wealthy or connected in order to avoid their cival duty.

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