Electricity prices to rise to ฿4 a unit from May as government plans a new series of supports for families in its effort to raise spending power. The fall-off in oil prices has calmed fears about stagflation with the rise of the tax take auguring well for economic prospects once crisis headwinds are lifted.
Thailand’s economic prospects and bottom line both received a boost this week as the price of oil receded by 17% after surging the week before and the tax take from the opening five months of the fiscal year came in with a boost of over 5% or ฿46 billion. Nearly ฿2 billion of this alone came from a new VAT tax levied on foreign advertising platforms within Thailand such as Facebook and Google which generated nearly ฿2 billion for the kingdom with the new VAT charged on 127 foreign corporations yielding a total of ฿3.12 billion.
The Thai government’s financial position received a boost in recent days when the Revenue Department reported that tax collection was ahead by ฿46 billion in the five months from September 1st 2021 to the end of January 2022.
It comes in a week which also saw heightened fears over the price of oil and a return to 1970s era stagflation recede when market prices worldwide slid back from $126 a barrel to $105 for West Texas crude (WTI) with trading futures for oil also stabilising at a more benign price with the price of WTI crude for July coming in at $98.25.
Excess tax take to be applied to help people with higher living costs says top Finance Ministry official
Commenting on the boost to the government’s efforts, the permanent secretary at the Ministry of Finance, Krisada Chinavicharana, said that any excess tax taken ahead of projections this year will be used to alleviate the sharp rise in the cost of living for the Thai public.
Oil still boss as Thailand’s economy faces a return to 1970s stagflation over the ongoing Ukraine war
He revealed that the government had collected ฿911 billion in the first five months of the fiscal year producing a ฿46 billion surplus.
The financial budget and projections for the year provide for total government expenditure of ฿3.11 trillion with ฿2.4 trillion projected in revenue as the government seeks to underpin the economy and prospects for a stronger GDP recovery in 2022.
New supports to boost people’s spending power being considered by the cabinet as electricity prices rise
The Thai cabinet meeting on Tuesday 22nd March is reported to be prepared to consider further measures to support the spending power of the public at this time as it has already been confirmed that electricity prices will be rising to ฿4 per unit of electricity from a current ฿3.85.
This will be implemented from May until August due to the spike in world oil prices.
The price will be applied to all electricity account holders including commercial and residential properties.
The hike in electricity prices will also coincide with the end of Phase 4 of the ‘Khon La Khrueng’ subsidy programme for the public where the government pays 50% of the cost of food, drink and general grocery items up to ฿150 per day.
Schemes must end when economy normalises
This week, the top Finance Ministry official declined to speculate on whether a fifth phase of the scheme will be introduced after the end of May.
He said such schemes cannot be maintained on a permanent footing as the economy is now poised to return to normal with most limitations due to the pandemic having already been lifted.
Included in the ฿46 billion windfall for the government is a boost from the new Value Added Tax charge of 7% levied on foreign entities outside Thailand who generate income online within the country.
New Value Added Tax (VAT) on goods and services paid by 127 foreign internet firms boosts state coffers
The new tax stream became effective on September 1st 2021 and has surpassed expectations with a total collection of ฿3.12 billion from 127 foreign firms whose turnover in Thailand exceeds ฿1.8 million per annum.
63% of this income came from online advertising revenue generated by some of the world’s largest social media and online networks which contributed ฿1.96 billion to the government’s bottom line.
Foreign eCommerce platforms generated ฿839 million for the government on a turnover of ฿11.99 billion.
A further ฿282 million was derived from VAT on membership fees for gaming and music services provided by firms outside Thailand on a turnover ฿4.02 billion while ฿12.8 million was derived from accommodation fees and ticket sales on a turnover of ฿183 million.
Well in excess of the ฿5 billion projected
The Director of the Revenue Department, Ekniti Nitithanprapas, told reporters that based on the performance of the new tax in the opening five months, his department felt that the final tax take from the new income source will be between ฿8 billion and ฿10 billion, well ahead of the ฿5 billion projected.
‘Collecting e-service tax from foreign operators or an online platform that provides electronic services to users in Thailand collected more than ฿3 billion in just 5 months, so it is expected that within 1 year the Revenue Department will be able to collect VAT from the service provider platforms overseas, to the order of ฿8 billion to ฿10 billion, which is higher than previously expected to be collected at ฿5 billion’, he explained to journalists when presenting his reports for the opening five months of the fiscal year 2021/2022.