Thailand’s government is urgently studying a negative income tax (NIT) plan to include all adults in the economy, addressing an ageing society and a widespread untaxed informal sector. Reforms could extend to foreign residents and marginalised groups.
Thailand’s Ministry of Finance is presently conducting a study into the introduction of a Negative Income Tax (NIT) scheme. This was confirmed on Monday by Deputy Minister of Finance Julapun Amornvivat. The measure is considered urgent as the country’s financial structure, particularly its social welfare card schemes, can no longer withstand the demands of an ageing and less productive population. It comes as Thailand has now officially become an aged society.
Thailand’s Deputy Minister of Finance, Julapun Amornvivat, has suggested that a review of Thailand’s proposed negative income tax programme will soon be completed.
In short, the proposal may later be submitted to the cabinet. The minister emphasised that the matter was growing increasingly urgent due to the country’s chronic demographic problem.
At the end of 2023, he confirmed, Thailand officially became an ageing society. Essentially, over 20% of the population is currently believed to be over 60 years of age. In short, this cohort of people amounts to 13 million Thai nationals. However, some of these still work well beyond the normal retirement age.
Tax reform needed as welfare card scheme grows unsustainable, with 50% of the economy untaxed
In the meantime, due to the nature of the country’s development, 50% of economic activity remains outside the tax net. During the government of General Prayut Chan-o-cha, a welfare scheme of sorts was established.
In brief, those on marginal incomes and the disabled were provided with welfare cards. Certainly, this was used to effect stimulus measures during the pandemic crisis. Indeed, also in recent weeks, the first phase of the adjusted Digital Wallet giveaway went into effect. It used this database network.
Up to ฿142 billion has been distributed in cash to over 14 million cardholders. However, on Monday, Minister Julapun warned that the card scheme cannot continue without substantial reform of the country’s tax system.
Since Prime Minister Paetongtarn Shinawatra took office, her economic ministers have repeatedly talked about establishing a Negative Income Tax (NIT) system. In effect, it would be the Pheu Thai Party’s version of a social welfare system. The proposal was indeed part of the PM’s policy statement to parliament in September.
Expanding tax base essential as government considers reforms to include nearly all adults and expats
However, as the government studies its own plans, the first question is how to get all income payers to register for tax. In short, one of the first moves will be to require nearly all adults to file the PND91 annual income tax form.
That includes those currently outside the country’s social security system for employment. At this time, only 14 million Thai workers participate in the scheme. Meanwhile, only people with an annual income over ฿120,000 are obliged to file annual income tax returns.
Certainly, this new programme is coming at the same time the government is aiming to bring in expats or foreign residents in Thailand into the system.
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Indeed, it is assumed that all foreigners living in Thailand are presently in receipt of income in excess of ฿120,000 per annum. In the first three months of 2025, all foreign residents will be required to file tax returns for the period from 1st January 2024 to 31st December 2024.
Government must set thresholds to determine who pays tax and who benefits from the NIT scheme
However, in the bigger government scheme, the government must set thresholds. Basically, who will be a taxpayer, and who will be beneficiaries of this scheme? It will be designed, of course, to benefit the elderly who cannot work, unemployed people, and those on very marginal incomes.
“The first step to establish an NIT system is to bring everyone into the tax system. Regardless of whether they fall under the taxable income threshold,” said Mr. Julapun on Monday. “The government must later establish an income measurement to set a threshold level, with a mechanism for tax refunds to assist them.”
Nonetheless, it should be noted that firstly, there is no scheme on the table as of yet. Nor, of course, is any legislation passed in that regard.
At this time, the proposal is being studied by the Fiscal Policy Office and the Revenue Department. The former had previously carried out studies on such a proposal. Minister Julapun said officials are looking at mechanisms and thresholds to implement a practical system.
At this time, the Thai Social Security scheme benefits all payees who participate in it, including foreign workers. Certainly, it is assumed that foreign taxpayers may also benefit under the scheme, although this may be subject to clarification.
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Further reading:
Minister outlines plans for Casinos, Disneyland and a tax support system for workers to Parliament
Legal casinos and gambling in Thailand being weighed up carefully after Deputy PM’s backing
Top Royal Thai Police officers under scrutiny over links to huge illegal online gambling cash flows
