There are talks about raising value-added tax in Thailand every year, but this year could be different with the new leader in the ruling party backed by Thaksin Shinawatra.
Prime Minister Paetongtarn Shinawatra, daughter of former leader Thaksin Shinawatra, is trying to lower corporate income tax to boost profitability of businesses in Thailand.
However, the decrease in government income will be too large without anything to offset the gap left by cutting corporate tax. Which is why the Finance Ministry is in a serious discussion of raising VAT.
According to an earlier projection, the government is expecting to collect about 970 billion baht from VAT in fiscal 2025. Based on an assumption by CGS International Securities Thailand (CGSI) that the VAT is raised by 1-8 percentage points, the government should have an additional 138 billion baht in tax revenue.
Still, that amount is not enough to offset a decline of 209 billion baht from corporate tax income if the government cut it from 20% to 15% next fiscal year. This is based on the projection of the government collecting 836 billion baht of corporate income tax in 2025.
Due to this reason, CGSI expects the government to raise VAT by 1.5-8.5 percentage points to neutralize the impact of the 5 percentage points cut in corporate income tax rate. With this cut, market EPS is expected to grow 19% in fiscal 2025, compared to 12% growth without the tax cut.
