Finance Ministry keen on balanced budget

Tax, spending rejig to power effort

The Finance Ministry expects a more focused reform of both revenue collection and expenditure to achieve a balanced budget in the next decade, says the ministry’s permanent secretary

Krisada Chinavicharana.

He said government expenditure has continued to rise in part because Thailand is an ageing society, resulting in more pension payments. Annual pension payments have surged to around 90 billion baht from 40-50 billion baht in previous years.

Annual state payments for farmers’ income guarantees have also jumped to around 150 billion baht, from 50-60 billion in previous years.

Mr Krisada said the government set a deficit ceiling target of 3% of GDP, beginning in fiscal 2024, as part of its plans for a balanced budget.

The deficit during 2020-2021 accounted for 4-5% of GDP as a result of higher government spending to mitigate the impact of the pandemic.

He said the ministry implemented tax reforms to increase the country’s revenue and ensure fair tax collection. However, some of the reforms faced obstacles over the years after changes of government and shifting policies, said Mr Krisada.

The ministry’s tax reform committee reviews the tax reform plan every five years.

He said reform of value-added tax (VAT) has been part of the ministry’s overall tax reform plan for a while, but it cannot predict when the reform would be implemented.

Even if the ministry does not increase the VAT rate, it can make other changes to raise the country’s revenue, said Mr Krisada. For example, he said some tax deduction measures might be terminated, which could increase the government’s revenue by 50 billion baht, equivalent to raising the VAT rate by one percentage point.

Thailand has recorded budget deficits for more than 20 years. To offset the deficit in fiscal 2021 and 2022, the government borrowed 736 billion baht and 700 billion baht, respectively.

In fiscal 2023, the government plans to cover the deficit with a borrowing target of 695 billion baht. The borrowing represents 21.8% of government expenditure.

In a related matter, Finance Minister Arkhom Termpittayapaisith said yesterday the Council of State finished vetting the draft law of a financial transaction tax on share sales by individual stock investors.

The regulation is slated to be sent back for cabinet approval, then published in the Royal Gazette. The tax comes into force three months after publication.