THAILAND will extend tax incentives to millions of its middle and upper income groups to fire up consumption and counter the nation’s worst economic slump triggered by the coronavirus pandemic.
The concession will allow about 3.7 million taxpayers to deduct 30,000 baht ($96) each from their total taxable income and will cost the government 11 billion baht, Deputy Prime Minister Supattanapong Punmeechaow told reporters in Bangkok Wednesday. The proposal, approved by the Center for Economic Situation Administration headed by Prime Minister Prayuth Chan-Ocha, will now be put for cabinet approval on Monday, he said.
Thailand, like most of the emerging market economies, is betting on an expansive fiscal policy to cushion the blow from the virus outbreak that’s devastated its tourism and exports. The tax breaks will come on top of the 51 billion baht cash handouts approved by the cabinet last week that’s targeted at 24 million of the low-income groups and welfare cardholders.
Prayuth is now accelerating government spending to turn around the economy that the central bank estimates will take two years to return to the pre-pandemic level. Southeast Asia’s second-largest economy is on track this year for its worst contraction on record, with the Finance Ministry predicting gross domestic product will shrink 8.5%.
The government has announced an economic stimulus program worth $60 billion and the central bank has cut interest rates to a record low to prop up growth. The Monetary Policy Committee of the Bank of Thailand wants fiscal policy to play a greater role going forward to support economic recovery with government measures continuously implemented in a targeted and timely manner.
The benchmark SET index of stocks rose as much as 1% to its highest level in more than two weeks on Thursday with the SET Commerce Index jumping as much as 1.9%, the most since Sept. 15.
The latest tax breaks and co-payment programs can together deliver a 200 billion baht boost to the Thai economy in the final quarter, Mr. Supattanapong said. The tax relief will exclude spending on alcohol, cigarettes, lottery, hotel and airlines costs and will be valid between Oct. 23 and Dec. 31, according to a government statement.
The national economic panel also recommended extension of a co-pay program subsidizing hotel and airfare costs for local tourists by three months to Jan. 31. The government will continue talks on relaxing its border curbs on skilled foreign workers and investors in the coming months, Mr. Supattanapong said, adding the guidelines for entry of foreign investors will be discussed by the national Covid-19 task force.
Thailand has already announced plans to gradually allow return of foreign tourists to minimize job losses and prevent shuttering of more hotels and travel-related businesses. More than 2,000 tourists have shown interest under a special visa program that would allow them to stay in the country for as long as 270 days, the government said. — Bloomberg