In a bustling Bangkok bank, a teller counts crisp Thai banknotes, emblematic of an economy poised on the verge of a potential tax overhaul. Prime Minister Paetongtarn Shinawatra finds herself amidst a whirlwind of criticism and concern, as the Finance Ministry toys with the notion of doubling the nation’s value-added tax (VAT) from its long-standing rate of 7%. A murmured proposal of a 15% hike has stirred significant public unrest, prompting the Prime Minister to express, “I understand the plight of the people if VAT were to be raised.”
Finance Minister Pichai Chunhavajira, who also carries the responsibilities of a deputy prime minister, assured that more details would soon emerge regarding the proposal. On an ordinary Wednesday, Mr. Pichai stated, “We are merely studying the possibility, considering global tax trends, and weighing potential pros and cons to ensure public favor.”
VAT, since its inception in 1992, has steadfastly remained at 7%, despite whispers through various administrations advocating a rise to 10%. Rather than commit to a definitive figure, Mr. Pichai emphasized the importance of public discourse. “Gathering public opinions is paramount; a VAT escalation would resonate across the societal spectrum,” he elaborated, during his address at the Sustainability Forum 2025 in the heart of Bangkok.
Diving into global tax currents, Mr. Pichai touched on the Organisation for Economic Co-operation and Development (OECD) guidelines recommending a standard 15% corporate tax, urging Thailand to consider trimming its present 20%. He also highlighted global trends in courting skilled expatriates with slashed personal tax rates, a stark contrast to Thailand’s persistent 35% rate.
Minister Pichai shed light on Thailand’s unbalanced fiscal composition. “Our personal income tax base is relatively lean, while consumption taxes weigh heavier, necessitating reevaluation,” he noted. Thailand’s VAT currently lounges at 7%, capped at a permissible 10%, while other global frameworks feature VAT rates stretching from 15% to 25%.
“Consumption taxes tread a fragile line. A judicious increase could wield benefits for the lower-income bracket by narrowing wealth gaps. If wealthier citizens shoulder higher tax burdens commensurate with their expenditures, overall revenue could swell, paving pathways for bolstering low-income initiatives and sprucing up national infrastructure,” mused Mr. Pichai.
Beyond enhancing societal equity, Mr. Pichai underlined the urgency of beefing up national savings, especially as Thailand anticipates an ageing demographic. Despite existing social security and provident fund buffer, he cautioned that resources may dwindle post-retirement.
Lavaron Sangsnit, finance’s permanent secretary, weighed in, stressing the constitutionally challenging nature of overhauling taxation structures. “Political backing and economic recovery are vital precursors,” Lavaron advised. The timing, he underscored, must be impeccable.
Resonating with dissent, People’s Party deputy leader Sirikanya Tansakun took to social media platform X, questioning, “Is a 15% VAT too harsh? The hardest hit will be the salaried and middle-income earners.” Thanakorn Wangboonkongchana, from the United Thai Nation Party, echoed similar sentiments, cautioning against price surges in goods and services.
Despite looming concerns, on September 17, the cabinet sanctioned an extension of the current 7% VAT rate for another year, designed to buffer against escalating living expenses and spur consumer expenditure. Government spokesman Jirayu Houngsub articulated that the prolongation of the VAT rate, hovering between 6.3% sans local taxes and 7% inclusive of them, would stretch till September 30, 2025.
This pause addresses cost-of-living spikes while galvanizing consumer activity and bolstering business faith in Thailand’s economic stability, reinforcing the nation’s commitment to serving its people amidst fluctuating financial winds.
I honestly think doubling the VAT to 15% is very unreasonable. It’ll hit the middle class the hardest!
But Joe, isn’t it necessary for long-term economic stability? Other countries have even higher rates.
Sure, but you can’t just compare without considering local incomes. People aren’t earning like Europeans!
I agree with Joe, a huge jump could diminish disposable incomes and negatively impact the economy.
Higher VAT can actually drive businesses away. We need to tax wealth more.
It’s ironic how they talk about closing wealth gaps, then propose a tax that hits everyone the same way.
15% VAT might be good for government pockets, but what about our bills? It’s like they don’t see us struggling.
The government needs revenue, but you’re right, it’s a delicate balance. Maybe they should rethink how they spend.
Exactly, Average Joe! The real issue is inefficient government spending.
But increasing VAT can be a strategic move if channeled correctly into public services and infrastructure.
It seems like a sneaky way to increase funds without bothering the wealthy too much. Typical politics.
SmartConsumer, focusing on consumption taxes tends to impact all citizens comparatively.
Honestly, taxes need to be fair. Hitting the working class harder than the upper class is not the way to go.
True, Hank. A progressive tax reform is necessary rather than blanket consumption tax hikes.
If they implement this, what happens to the small businesses barely scraping by?
Trisha, small businesses could suffer the most. They often can’t absorb these cost increases.
It’s an ongoing cycle. Higher costs drive small biz prices up, consumers spend less, and the economy slows.
Don’t forget the social impact. VAT affects education costs too. Increased tuition fees could be an outcome.
More tax talks! Why not cut unnecessary government spending before taxing the people more?
Absolutely! The government should prioritize efficiency. Why should we pay the price for their mismanagement?
I’ve lived in countries with higher VAT and it’s fine if healthcare and services are top notch, it just doesn’t equate here.
Exactly, Emily. People would be more receptive if they saw tangible benefits. It’s about trust and delivery.
In theory, a higher VAT isn’t catastrophic if accompanied by improved services, but this is Thailand we’re talking about.
Economic theory aside, if the people are unhappy, it’s bound to backfire politically.
They should consult economists more extensively. It’s vital to tailor such policies to our unique economic context.
We need transparent public forums. They should let us weigh in before making decisions that impact us directly.
I’m with you, Ben. Public discourse can shed light on practical impacts before policies are enacted.
Why not evaluate a more equitable tax system first before jumping to VAT hikes?
Countries facing similar demographic changes should unite in innovative solutions, not just copy what’s A or B.
What about environmental taxes? Encourage sustainability while addressing budget gaps!
Higher taxes in urban areas might be feasible, but what about rural communities with less economic activity?
No tax system is perfect but striving for a fair and balanced approach should be the core aim. Let’s progress!