Thailand – FPO: Unnecessary waivers, deductions need scrapping

The Fiscal Policy Office (FPO) is to ask the Finance Ministry to consider winding down unnecessary measures related to tax waivers and tax deductions, in the wake of a decline in net government revenue as a proportion of GDP, says a ministry source who requested anonymity.

The source said that according to the FPO’s report on fiscal risk as of August, net government revenue as a proportion of GDP is expected to continue falling, from 14.6% in fiscal 2021 to 13.3% in fiscal 2026.

The government should keep only necessary tax waivers and tax breaks, as well as seeking ways to broaden the tax base and improve tax collection capacity to boost revenue, the source said.

The source added that revenue from income tax and value-added tax has also continued to fall as a proportion of GDP. Therefore, the government should focus on improving the collection of revenue from these significant income sources.

However, reform should also consider the economic impact and the burden of the general public and the private sector.

The FPO also evaluated the long-term fiscal risk stemming from the fact that the government’s interest costs as a proportion of its expenditure have been rising, the source added.

Interest expenses are expected to rise to 9.08% of the government spending budget in fiscal 2026, from 5.92% in fiscal 2021, in line with the upward trend of interest payments.

The government still has to shoulder the high cost of providing welfare to state officials and the general public, the source added.

In fiscal 2021 the budget for state officials’ welfare, such as subsidised healthcare, stood at 449 billion baht, accounting for 13.6% of total government expenditure, while the provision of welfare for the general public cost 400 billion baht, representing 12.2% of overall spending.

Another fiscal risk in the future will come from the instability of the Social Security Fund, which has been worsened by the impact of the Covid-19 pandemic.

The government has told members to reduce their contributions to the fund during the pandemic to ease their burden.

The state will also have make an overdue accumulated contribution of 60 billion baht to the fund.

The Finance Ministry has continued to plan for budget deficits in its 2023-2026 medium-term fiscal framework, in line with its plan to revive economic growth as the pandemic eases.

In the long run the government will focus on reducing the budget deficit. To achieve that goal, it will try to bring down the annual budget deficit ratio to under 3% of GDP for at least next five years, in order to maintain fiscal discipline and facilitate its attempt to then bring down the public debt-to-GDP ratio, the source added.

Source: https://www.bangkokpost.com/business/2406520/fpo-unnecessary-waivers-deductions-need-scrapping