Dare to do it ? They think to cut VAT rate from 7 to 3 %

I have to say that the brains behind the government’s desks don’t take rest… Here is their last -bright- idea in order to fight inflation… Cut the VAT rate… For 3 to 6 months 😉 !

The Commerce Ministry will propose cutting value-added tax (VAT) on consumer products from 7 per cent to 3 per cent for three to six months to help people cope with the cost of living, Internal Trade Department director-general Yanyong Phuangrach said yesterday.

The proposal will be submitted to the Finance Ministry for consideration.

It is aimed at easing the burden on consumers from rising oil prices and inflation, which reached 8.9 per cent last month.

“The proposed temporary VAT cut would help consumers directly, immediately bringing down the price of goods,” said Mr Yanyong.

Food and beverages would be the consumer segment most affected. (Bangkok Post)

The authorities start to understand that to lower tax on gasoline won’t deter businesses to increase their prices. So the only way to get automatic and immediate cuts of prices would be indeed to reduce the VAT rate.

In average the VAT yields 39 billions THB per month… For all products and services.

We don’t know what is the total for only consumer products. Therefore, we can’t calculate the cost of such idea.

But anyway, once again, this idea is idiotic. 3 against 7 % would it be enough ? And what about the time frame… 3 months ? !

My -rational- bet : they won’t do it. They can’t. Too costly. And it would be a psychological disaster when after 3 or 6 months… suddendly the VAT rate would go up again.

But we need to remember that the times are not rational at all… Wonderland, White Rabbit Hole, Zimbabwe… actually they… could do it. 😉

Well, the reaction was fast.

Deputy Prime Minister and Finance Minister Surapong Suebwonglee insisted on Monday that the Commerce Ministry’s proposed cut in value-added tax from 7 per cent to 3 per cent is impossible in the current economic conditions.

He noted that the government has enforced several tax measures to stimulate the economy, and if VAT is reduced, it would deplete the government’s revenue.

VAT is a major source of revenue. For two years, we have delayed the increase in VAT to 10 per cent and instead focused on boosting the economy through higher tax deduction allowances, higher depreciation costs, and a cut in special business tax for the property sector. Inclusive of the six recently-endorsed measures, we have lost a large amount of revenue and there is no need to enact a tax measure to control product prices.

But… Surapong is likely to loose his job (read here). The new Finance Minister could have other ideas. 😉

2 Responses to “Dare to do it ? They think to cut VAT rate from 7 to 3 %”

  1. 1 tom_bkk 28 July 2008 at 3:34 pm

    They dont dare it according to Bangkok Post … good

  2. 2 ThaiCrisis 28 July 2008 at 3:54 pm

    Yes. The left brain didn’t agree with the right brain.

    It’s hard in Thailand to have 2 “brains”…

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Thailand Crisis

Coup, Economic slowdown, Terror In the South... The situation is worsening in Thailand. Bumpy road like often before.

But this time, it's different.

The key to understand the present turmoil is the inevitable... succession of King Bhumibol.

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