Thailand’s Tax Revolution – The Revenue Department of Thailand embraces a new era in tax enforcement, sharing data with 138 countries within the OECD framework. As the government sets an ambitious revenue target of ฿2.2767 trillion for fiscal year 2024, the move aims to combat tax avoidance and elevate economic recovery. Foreign firms, residents and tourists expected to foot more of the bill.

Thailand is moving toward greater integration with the international tax framework to stamp out tax avoidance and evasion. Significantly, it comes with the Revenue Department reporting a surge in income in the first few months of the fiscal year which will also see foreign residents more closely scrutinised for tax. Thailand’s Revenue Department is to share tax information with 138 countries worldwide as part of the new OECD framework agreed in July 2023. At the same time, the September 15th order which altered the income tax status of all foreign residents after 35 years is also now in effect.

On Friday, the Director-general of the Revenue Department revealed a surge in tax receipts from October and November 2023. They were driven by a recovery in foreign tourism. At the same time, she also pointed to Thailand’s integration with the OECD tax collection framework. The country will play its part in ending worldwide tax avoidance and evasion by international firms and foreign residents.

Thailand’s tax authorities are expecting a bumper 2024 as the Pheu Thai government aims to widen the kingdom’s tax base. In brief, the government sees this as a factor in bolstering economic recovery while simultaneously combating inequality in the country.

The Revenue Department of Thailand has set an ambitious revenue collection target of ฿2.2767 trillion for fiscal year 2024.

Certainly, it is a substantial increase from the previous year’s target of ฿2.029 trillion, reflecting a growth rate of approximately 3%.

In short, government revenue is expected to grow by 3% in 2024 despite a tough economic environment. This includes higher interest rates and weak demand 

Ms Kulaya Tantitemit, Director-General of the Revenue Department, highlighted the challenges posed by the estimated economic expansion.

On the other hand, Thai firms in the private sector labour under a 13-month interest rate high. Many enterprises are struggling with weak export demand and high borrowing levels.

‘In 2024, we face factors such as the upward trend in interest rates and challenges in energy prices. While these may impact buoyancy to some extent, we believe that overall, we will achieve our targeted revenue,’ disclosed Ms Kulaya.

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At the same time, tax officials have begun implementing reporting requirements for internet giants.

There is also an effort to scrutinise and tax foreign residents in the kingdom.

Regardless, the ‘Wild West’ days of mobile world citizens and international corporations avoiding tax are drawing to a close.

Internet giants are being targeted as well as foreign residents as the tax regime worldwide tightens up on avoidance and evasion across 138 countries 

In 2022, the Thai tax man began to levy Value Added Tax (VAT) on advertising services provided by internet giants in the kingdom.

In addition, a new Revenue order P161-2023 was introduced on September 15, 2023. This came days after Prime Minister Srettha Thavisin took office as Prime Minister and Minister of Finance. 

The September 15th order imposes a clearer obligation in relation to tax reporting for foreign residents in Thailand.

In any case, this applies even if they are registered in their own countries and can take advantage of tax treaties with 59 countries that Thailand has agreements with. All foreign residents, in theory, must still account for tax on an annual basis. 

The order changed a 1985 interpretation relating to the income of foreign residents abroad.

It declared that monies earned outside Thailand were only liable for income tax if generated in the current financial year.

At length, that ruling has long been a fig leaf. Formerly, it allowed a wide benign interpretation of the tax affairs of many foreign residents. In effect, retirees who are paid from pension funds were exempted.

New Revenue order related to foreigners’ income will have a significant impact on the financial affairs of expats living in Thailand from this year

Undoubtedly, some foreign residents will find the change leaves them liable for tax where previously it had not been levied. In the meantime, it will take time for the impact of this change to be seen. 

The Revenue order in September is likely to be challenged as the ruling also impinges on Thai investors abroad.

At the same time, Thailand has signed up to an Organisation for Economic Co-operation and Development (OECD) framework for sharing tax information. The goal is to stamp out the use of foreign domiciles for tax evasion.

The first two months of fiscal year 2024 (October-November 2023) have shown promising signs, with revenue collection surpassing expectations. 

During this period, the department collected ฿288 billion, exceeding the target by 4.6%, or ฿12 billion.

Buoyant tax receipts flowing into government coffers for October and November driven by the foreign tourism recovery seen in 2023, surpassing targets

November alone witnessed a continuation of this positive trend, with revenue collection reaching ฿146 billion, surpassing the target by 2.8%, or ฿6 billion. This surge is attributed to an expansion in Value Added Tax revenue, reflecting the recovery of consumption from the tourism sector.

Ms Kulaya expressed optimism about the direction of revenue collection. Of course, she cited the improvement in the tourism sector as a significant contributing factor.

‘The government’s economic stimulus measures in 2024 are expected to have a positive impact on revenue collection. The Revenue Department plays a crucial role, accounting for more than 75-80% of overall revenue,’ she emphasised.

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The Director-General also shed light on the government’s economic stimulus measures, emphasising their potential to generate tax revenue. She said this was particularly important in emerging market economies.

One notable aspect is the trend towards digitalisation while also ensuring Thailand honours its international commitments.

She confirmed that the country, in line with agreements among 138 OECD countries, is set to exchange tax information with other tax authorities. This will enhance transparency and efficiency in revenue collection worldwide and similarly, in Thailand.

‘Digital business trends, coupled with international tax information exchange, will contribute to the efficiency of revenue collection. This includes data on income from abroad being brought back into Thailand. We anticipate a positive impact on tax revenues from these measures,’ Ms Kulaya explained.

Thailand playing its part in the new OECD tax collection framework agreement signed in July 2023, among countries representing 90% of the world’s GDP

The OECD agreement was finalised in July 2023 among 138 countries including Thailand.

It is a major and historic reform in the administration of tax across the world. The participating countries represent 90% of the world’s GDP.

The twin goals of the agreement are digitalisation and full transparency between member states.

The goal is a fairer distribution of the tax burden and taxation rights for individual countries.

The agreement is seen as targeting large multinationals but also world citizens who use foreign domiciles to avoid tax.

In the meantime, Ms Kulaya underlined the Revenue Department’s strategic alignment with global tax information exchange initiatives. She said it reflects Thailand’s commitment to international standards.

Pheu Thai government sees Thailand, at this time, coming in from the cold as a good international player thereby boosting underlying investor confidence 

As the country battles with an array of economic challenges, leveraging emerging market trends and embracing digital transformations are seen as crucial to ensuring sustained growth.

The new Pheu Thai government wants to see Thailand accepted as an international player working within approved frameworks.

In brief, it is thought that this will boost international confidence and consequently more inward investment from Western countries.

Nonetheless, in the short term. Thailand’s ability to generate revenue is tied to the recovery of its foreign tourism sector. 

Certainly, this has begun to show signs of improvement in the wake of government interventions.

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The positive Revenue Department performance in the initial months of fiscal year 2024 sets an optimistic tone. Buoyant tax receipts support the nation’s economic rebound.

The money must keep flowing to fund expansionary government plans. These anticipate higher spending and borrowing in the year ahead to prime the economy

With its significant share in revenue collection, the Revenue Department’s performance is crucial to a government with an expansionary mindset. 

This week, the government unveiled a massive ฿3.48 trillion budget for 2023/24. At the same time, it projects a ฿693 billion deficit, ฿100 billion more than the previous government.

Prime Minister Srettha Thavisin sees government spending as a means to boost GDP. In brief, to bridge the gap between projected growth of 3.2% in 2024 and his party’s target of 5%.

In short, the government focus is on economic stimulus measures and international collaboration. Meanwhile, the Revenue Department is a key player in driving Thailand’s fiscal performance.

At this time, Thailand needs also to maintain its financial stability. 

Later in 2024, it may gain ground if the world economy picks up with lower interest rates in the US.

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