Bangkok Governor Chadchart Sittipunt urges the new government to reconsider and revert to the old tax system in order to guarantee increased revenue for local administrations, especially in shopping mall-rich districts such as Phaya Thai. The governor reports that under the new land-based tax, revenue in Phaya Thai has severely dropped from 10.7 million baht per year to a mere 1.08 million baht.
In defense of the old land and buildings tax, Chadchart argues that collecting 12.5% of sales and rent generated higher revenue compared to the current tax, which solely depends on the value of the land. However, a Finance Ministry source counters this criticism, asserting that Phaya Thai’s diminished revenue in 2021 and 2022 is attributable to the 90% tax cut granted to businesses as a relief measure amidst the COVID-19 pandemic.
The ministry remains optimistic that fully restoring the new land tax will enable Bangkok to regain its previous land tax revenue of 15 billion baht, which it achieved in 2019 under the old tax system, according to Thansetthakij news outlet. The source explains that introducing the new tax took over a decade and its primary goal was to help local administrations generate enough revenue, so as to reduce dependency on the central government’s budget.
Finance Ministry data reveals that prior to 2020, about 30 billion baht per year was granted to the 7,800 local administrations across the country under the old tax. The new land and building tax act was enforced in 2020 but experienced a 90% reduction during its first and second year due to the pandemic. Consequently, the Bangkok Metropolitan Administration (BMA) collected 1.256 billion baht in land tax in 2020 and 1.802 billion baht in 2021.
Upon fully restoring the tax rate in 2022, the BMA amassed 12.347 billion baht as of September 2022. In light of this, the Finance Ministry decided to cut the land tax by 15% this year after estimating revenue of 30 billion baht under newly established median land prices.
Finance Ministry spokesman and Fiscal Policy Office adviser, Wutthipong Jittungsakul, contends that the new land and building tax is fairer than its predecessor, with 34 different rates imposed on land and property owners depending on their property assets. Furthermore, the Finance Ministry has dismissed Governor Chadchart’s proposal to increase the tax rate for land in commercial areas used for agricultural purposes. Chadchart had suggested imposing a full rate of 0.15% instead of the current 0.01-0.1% on unused city plots where crops such as bananas are cultivated, thereby avoiding the commercial rate.
However, the ministry determined that implementing the proposal would unfairly discriminate against specific landowners, causing them to abandon this suggestion. Ultimately, the debate on whether reverting to the old tax system or adapting the current one will continue, with the goal of achieving fairness and optimum revenue generation for both local administrations and landowners.
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