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Thailand: 40% of SMEs joined formal tax system
Just 40% of the country’s 2.6 million small and medium-sized enterprises (SMEs) have agreed to enter the single-account scheme despite carrot-and-stick measures in place for a year, says Prasong Poontaneat, director-general of the Revenue Department.
The department has tried to prod SMEs into adopting a single account instead of the two or three accounts used to obscure actual earnings in order to avoid paying corporate income tax. Those SMEs that fail to register under a single financial account by March 15 will face heightened tax scrutiny. The single-account scheme is part of the Finance Ministry’s plan to bring businesses into the formal tax system.
The scheme allows registered SMEs with capital of up to 5 million baht and revenue of up to 30 million baht for the 2015 accounting year to have zero tax burden for the 2016 accounting year, a 10% corporate tax rate for net profits above 300,000 baht for the 2017 accounting year and a tax exemption for net profits of less than 150,000 baht. Normal rates will resume from 2018. Pipavat Bhadranavik, a representative of the Thai Bankers’ Association, said from Jan 1, 2018, local financial institutions must use the accounts businesses submit to the Revenue Department as a key factor in considering loans.
“Credit lending will be in line with the revenues submitted to the authorities. If your revenue is low, the credit line will correspondingly be low,” Mr Pipavat said.
Some 465,000 SMEs have participated in the scheme, resulting in a 4% rise in value-added tax (VAT) collected from SMEs in the 2016 tax year. The VAT increase from SMEs with sales of over 30 million baht but not exceeding 500 million was 3% last year.
Mr Prasong divided SMEs into four categories: those ready to register with a single account, those hesitant because they believe officials might not find evidence of their tax evasion, those willing to understate payments, and those who will never enter the tax system.
“Some people think it is fine to take a risk because they believe they can come in and negotiate with officials, but they don’t know we have an upgraded IT programme to reduce human interaction in tax calculation and collection. This makes it easier to trace records, making it easier to catch both SMEs and officials in evasion. If caught, both will face a criminal charge,” he said. “Other signs can suggest wrongdoing. For example, some SMEs in the North reported a combined accrued earning of 30 billion baht, but instead of a dividend payment, the companies’ debtors were also their directors. This does not make sense.”
Source: http://www.bangkokpost.com/business/news/1210129/40-of-smes-joined-formal-tax-system