NCPO scoffs at ‘rumours’ of VAT hike

The National Council for Peace and Order (NCPO) has dismissed “rumours” that the government will ask Thais to pay 1% more in valued-added tax (VAT), saying it has no plan to implement a hike.

NCPO spokesman Winthai Suvaree defended the government yesterday against speculation about a VAT rise, saying illintentioned people have tried to make people believe that the government is running out of money. They want to destroy people’s faith in the government by distorting information about a VAT rise, he added.

The government does not intend to increase VAT, he said.

Speaking on Thursday before a group of people who welcomed him at Prachin Ratsadornamrung School in Prachin Buri, Prime Minister Prayut Chan-o-cha asked Thais to make a sacrifice by paying 1% more in VAT to reap 100 billion baht for the state’s coffers.

Gen Prayut said the VAT rate has been kept at 7% for many years and that a 1% increase could generate more than 100 billion baht in additional tax revenue.

The government needs to generate income as it will go ahead with investment projects expected to produce good returns and lead to improved revenue from next year onward, including high-speed train and double-track rail projects.

The government’s expenditures have been spent on programmes that help improve the quality of people’s lives, he added. The premier reiterated that the government was not running out of money or attempting to find more by forcing taxpayers to pay more.

Col Winthai defended Gen Prayut as merely using an example to illustrate his point as to why the government needs to generate more income. It’s main source of revenue comes from tax, he added.

Col Winthai said the world is facing an economic malaise, and Thailand is not alone.

The government has worked hard to solve economic problems that the country has faced. And there are signs that the situation is improving, he added.

Responding to the rumours, Deputy Prime Minister Somkid Jatusripitak reaffirmed yesterday that the government does not plan to increase VAT.

He added he has never talked about the VAT issue with Finance Minister Apisak Tantivorawong. The economic situation is recovering so it is not good time for a VAT increase, Mr Somkid said.

The manner in which Prime Minister Prayut Chano-cha chose to make a plea for Thais to sacrifice by paying 1% more in value-added tax (VAT) as well as the timing could not be more wrong. It’s no surprise the premier’s latest move has been met largely with negative press coverage and a public backlash while members of his administration rushed to assure everyone that the VAT will remain unchanged at 7% for another year.

Fiscal policies, especially tax hikes, are always sensitive issues as they generate direct and wide-ranging impacts on the economy and people’s livelihoods. That is why government leaders customarily treat these measures with the utmost discretion. Suffice to say that a tax increase, or tax break, is not a topic for casual discussion, especially during public events by state officials or leaders, as the chances of a misunderstanding are usually high.

Gen Prayut later blamed the media for misinterpreting his intention when he asked at a public event in Prachin Buri if Thais could make a sacrifice and pay one more percent in VAT. The increase would give the government another 100 billion baht for the state budget which the government could use to fund more projects for the public good.

The premier said he did not mean to float the idea of a VAT increase or have any plan in store to have it raised. He said he only discussed VAT because he wanted to explain the issue to people who asked for more development projects as to why the government could not do everything for everyone at the same time.

In yet another display of his wrath against the media, Gen Prayut called the news reports “despicable”.

While it is true that Gen Prayut did not say outright that he will raise the VAT or have a plan to do so anytime in the future, his “asking” the public if they can make the sacrifice and pay a higher tax to allow the government to do more for them was open to interpretation.

Even though Gen Prayut was non-committal in his speech, his statement that the VAT rate has been kept at 7% for many years, that the government has a lot of expenditures, and that the country could go bankrupt if its income does not increase suggested that a hike could be imminent.

His asking the public if they could make a sacrifice and pay a higher tax so that the government has more money to invest is clearly indicative of what he would prefer to do if he had the chance to pull it off.

Gen Prayut may argue that his opinion or preference does not automatically translate into government policy but he has to face up to the fact that his stance matters. Indeed, it can be said that the PM’s personal views are even more closely watched than a cabinet resolution since he is not just a government leader but head of the National Council for Peace and Order whose orders may bypass any existing laws, executive decisions or court procedures.

At the very least, the premier’s statement could be seen as an overture, an attempt to gauge public reaction if such a measure is introduced. Again, the manner in which Gen Prayut seemed to have pleaded for people to understand the government’s need to find more income led the statement to be seen in that light.

Even if Gen Prayut meant to explain the financial constraints faced by his government in raising the VAT issue, the timing was poor. The country has been in the economic doldrums for a few years, with GDP growing at too low a rate to allow for effective wealth distribution.

In a time when people really feel the pinch of economic hardship, it’s insensitive for the government leader to discuss a possibility of a tax increase whether seriously or casually. In times like this, it’s the government that has to make a sacrifice for the public, not the other way around.

In times like this, it’s the government that has to make a sacrifice for the public.