Smart ID cards to pave way for negative income tax
Smart ID cards are a key element of the government’s plan to adopt a negative income tax, a financial subsidy for those at the low end of the pay scale, says the Fiscal Policy Office (FPO).
With smart ID cards, the government will know how much individuals make and provide a direct subsidy to those in need, said director-general Krisada Chinavicharana.
The negative income tax would replace costly populist policies, which have come under fire as instruments used by political parties to buy votes and reward higherincome earners.
Moreover, populist policies add to the long-term debt burden and pose a threat to fiscal stability if there is no limitation on pork-barrel spending. One notable example was the Yingluck Shinawatra government’s rice-pledging scheme.
The FPO estimates that a negative income tax would cost the government 56 billion baht per fiscal year, far below the 144 billion spent on populist policies in fiscal 2014.
The smart ID card is part of the government’s plan to take e-payments nationwide, with the first two components — Any ID and the expansion of electronic data capture (EDC) — to take effect in the first half of 2016.
Other initiatives include linkage of e-payments and the Revenue Department’s taxation system to make tax collection more efficient, as well as subsidising low-income earners directly through their ID cards and offering incentives for making e-payments.
A recent FPO study found that 18.5 million people (26% of the population) would benefit from a negative income tax, which would use the poverty line of 30,000 baht a year to determine who would receive financial support from the government.
The scheme is expected to help 1.6 million people cross the poverty line.
Under the scheme, the government would pay 20% of annual income to those earning 30,000 baht or less a year, meaning those who earned 30,000 baht would receive a 6,000-baht subsidy.
For those making 30,001 to 80,000 baht a year, the scheme would transfer cash at a declining rate of 12%. For instance, a person who earns 40,000 baht a year would receive a subsidy of 4,800 baht.