Nation publishes an article with quotes from the permanent secretary at the Finance Ministry.
It’s good to see an official speaking openly about this issue. But what is even more interesting are his suggestions to solve the problem.
First the admission.
Suparut expressed concerns over the government’s income, as consumption and corporate earnings nosedive. Revenue might be more than Bt130 billion behind budget this year, which is in line with some economists’ forecast for a Bt200-billion shortfall.
Plunging value-added tax collections is the first warning sign. In the first two months of this year, VAT contracted by over Bt10 billion each month against the targeted shortfall of Bt5 billion, due to lower imports for local manufacturing and lower domestic consumption.
Corporate income taxes for last year, to be paid in May, would be worrisome, but the Finance Ministry expects worse when corporations pay taxes for the first half of 2009 in August, he said.
Adding more gloom to the revenue picture are zero withholding taxes from deposits as interest rates fall and a drop in personal income taxes as people lose their jobs.
Given the downsizing of the economy and need for upsizing borrowing, public debt could soar 5 percentage points per year, he said.
Yes VAT is plunging, as the other revenues (see my chart). And he’s right to speak about the coming disaster of corporates taxes in august… that will cover the very bad results of companies during the first half of 2009.
Korn, the alleged Finance Minister, was still dreaming less than 2 months ago of “huge amount of cash” coming… from corporate taxes… He was unable to understand that with lower profits… will come lower taxes. Automatically.
“We should start asking ourselves if we should shift focus to agriculture and tourism. When we put 100 per cent in the electronics industry, we gain only 5 per cent.
But in agriculture and tourism, we gain 100 per cent and with proper know-how, it could be 200 per cent,” he said. “Agriculture could be the buffer against future shocks.” [added Suparut, the permanent secretary at the Finance Ministry]
Astonishing. In line with the “self sufficiency” theory. But he’s not totally wrong. Electronics (as sub contractor for the chinese IT industry for instance, itself being sub contractor of US companies, and low margins), electric appliances (very low margins) and of course the famous car industry that makes Thailand so proud (the car hub of Asia)… are not automatically a good deal.
Businesses know how to send profits outside the country, and they enjoy huge privileges (BOI, tax cuts, etc).
However, the money spend by tourists… for the most part, stays in Thailand.
However, there is a big flaw in his idea : due to global crisis, there will be less tourists coming to Thailand !