Cabinet extends 7% VAT collection

BANGKOK, Aug 3 – The Cabinet on Tuesday approved the Finance Ministry’s proposed extension of the value-added tax collection at 7 per cent for two years or until the end of September 2012.

Finance Minister Korn Chatikavanij said the Cabinet did not want to see the business sector bear higher costs due to the VAT hike because the Thai economy is on the path of recovery.

Simultaneously, the ministry was able to collect much more revenue than targeted and, therefore, saw no need to raise the VAT for the time being.

However, Bank of Thailand (BoT) Governor Tarisa Watanagase warning against the extension, saying that the government’s current revenue base is rather small while its expenditure is quite high.

Because of this, the government must find out what it could do in the long run to ensure its revenue is sufficient for its spending.

“The issue needs to be monitored because it can become a long-term problem and fuel the country’s public debt. Although it has not yet caused any problem,
there is a question on how the government can do to enhance [Thailand's] economic competitiveness,” said the BoT chief. (MCOT online news)