The government has launched tax breaks to encourage consumer spending this year, in a bid to stimulate the economy. But will it work and who is going to benefit?

From January 1 to February 15, the governments is implementing “Easy E-Receipt”, a tax deduction measure.

Who is eligible?

Under the scheme, individuals will receive a tax deduction of up to 50,000 baht from their taxable income if they shop for goods and services from businesses in line with government criteria.

The actual tax deduction will materialize when they file their annual personal income tax returns next year.

To take advantage of it, consumers have to get an e-tax invoice or e-receipt from the sellers. The e-tax invoice will be issued by businesses registered in the value-added tax (VAT) system, which includes large corporations.

But some items are excluded from the tax deduction scheme. They include: alcoholic drinks-spirit, beer and wine; cigarettes; car, motorcycle, and boat; oil and gas for vehicles; utility bills – electricity, tap water, telephone and internet are not covered; long-term service contract beyond January 1-February 15 this year; non-life insurance premium.

Promoting community-made products

Shoppers buying goods and services from businesses that are not registered in the VAT system will be issued an e-receipt.

Eligible products are: books, newspapers and magazines; electronic books, newspapers and magazines; products of OTOP which are registered with the Community Development Department, as the government wants to promote village-made products.

The e-tax invoice and e-receipt must state the full name of the buyer and their ID card numbers.

Individuals who pay personal income tax and shop owners can get more details at  www.rd.go.th, or  consult the RD Intelligence Center’s phone number 1161.

Major retailers such as Central Department Stores, the Mall, Siam Paragon and Big C have welcomed the tax incentive measure and launched their sale campaigns.

Some are offering additional gift cards and zero per cent interest for purchases on instalments.

Kulaya Tantitemit, director-general of the Revenue Department, projects that the tax deduction scheme will boost spending by about 70 billion baht and push up gross domestic product by 0.18 percentage point.

Without the scheme, the Finance Ministry has forecast Thailand’s economic growth rate at 3.2 per cent this year, up from about an estimated 2.5 per cent in 2023.

The coalition government led by Pheu Thai Party aims to achieve 5 per cent growth during its four-year term in office.

Electronic tax system

The government expects the scheme will encourage businesses to use the electronic tax system developed by the Revenue Department. The government budget is under pressure from low tax collection against rising spending obligations.

Tax collection is about 15-17 per cent of gross domestic product (GDP), a gap of about five percentage points with spending, according to the World Bank, which has urged the government to raise revenue.

Some small businesses believe the scheme will mostly help big businesses and they could sell more products and services such as electric appliances and telephone handsets.

Some economists believe that it would have only a short-term impact, as people may spend more during the tax incentive period but less in later months.

To maintain the purchasing power of the consumers, the government has also extended the tax incentives to people who want to own homes costing not more than 3 million baht.

The low transaction fee of 1 per cent, down from 2 per cent, and mortgage fee of 0.01 per cent, down from the normal 1 per cent, will be extended until December 31, 2024 after the tax relief  expired at the end of last year.

Mortgage loan applications of lower income groups are facing high rates of rejection, which have contributed to oversupply of affordable houses priced at not more than 2 million baht, according to Vichai Viratkapan, acting director-general of the Real Estate Information Center.

Anusorn Tamajai, director of Digital Economy, Investment and International Trade Research Center at the University of Thai Chamber of Commerce, said that economic growth in the first quarter of this year was expected to accelerate due to tax breaks.

If overall economic recovery is steady, then the growth momentum would continue into the second quarter.  However, if the macro-economic environment in the first quarter is not robust, growth could decelerate in the second and subsequent quarters.

Consumption accounts for more than 50 per cent of Thailand’s GDP. The Bank of Thailand projects expansion of private consumption by 3.2-4.5  per cent this year, slowing from 7.1 per cent last year.

However, persisting high household debt at 90 per cent of GDP will be a constraint on consumer spending.

By Thai PBS World’s Business Desk