BANGKOK — Prime Minister Paetongtarn Shinawatra has abandoned a controversial proposal to increase Thailand’s value-added tax (VAT) to 15%, following widespread backlash after Finance Minister Pichai Chunhavajira suggested the hike earlier this week.
“No VAT adjustment to 15%,” Ms. Paetongtarn announced on Friday via X (formerly Twitter) after a meeting with Mr. Pichai and her advisory team. The decision comes as the government seeks to address social inequality and enhance economic competitiveness through tax reforms without burdening the public.
Thailand’s VAT rate has remained at 7% since 1992, despite multiple proposals to raise it to a legal ceiling of 10%. Mr. Pichai’s earlier comments sparked concerns about rising costs for consumers and disproportionate impacts on low-income groups. Critics, including coalition members such as the United Thai Nation Party, voiced opposition, warning of potential inflationary effects.
Ms. Paetongtarn acknowledged that such a hike would harm the public, but the Finance Ministry continues to explore reforms, including potential reductions in corporate income tax from 20% to 15% and personal income tax from 35%, to attract investment and skilled labor. However, concrete plans for these adjustments remain undefined.
Opposition MP Sirikanya Tansakun of the People’s Party urged Mr. Pichai to present a clear roadmap for tax reforms to ensure transparency and public confidence. She highlighted the need for clarity on other proposed measures, such as capital gains tax adjustments.
Thailand’s tax-to-GDP ratio has stagnated at 17% since 2007, lagging behind the Asia-Pacific average of 19% and the OECD average of 34%, according to the Organisation for Economic Co-operation and Development. VAT accounted for roughly 25% of Thailand’s tax revenue in 2022, OECD data shows. Neighboring Indonesia plans to raise its VAT to 12% in 2025, offering a regional comparison for fiscal strategies.
