Finance Minister Worried About Hidden Debts

[limbo]

Finance Minister Thirachai Phuvanatnaranubala has expressed concern over hidden debts derived from the government's populist policies, while economists propose increasing the value-added tax (VAT) to 10 per cent.

 

Preparing to propose a budget bill for the next fiscal year, Thirachai said yesterday that he wanted to know the off-budget balance in order to make an accurate assessment of the government's finances.

 

Some spending items do not show up in the government balance sheet but are hidden off-budget, such as subsidies for farmers through loans from the Bank for Agriculture and Agricultural Cooperatives, he said.

 

The BAAC earlier said the government had not yet compensated it for about Bt100 billion in farm subsidies by past administrations.

 

Did the government has compensated state banks that proving loans to village funds,? Thirachai asked.

 

"I want these obligations to show up and I want to cut them off before planning new spending," he said.

 

"If too much debt is accumulated, Thailand could face a public-debt crisis as Greece is facing now."

 

Meanwhile, Kanit Sangsubhan, director of the Fiscal Policy Research Institute, told a seminar yesterday that the government needed to increase VAT from 7 per cent to 10 per cent to maintain fiscal sustainability.

 

Such a rise in the tax could be accepted by the public when the economy fully recovered, he said.

 

The new government plans to cut corporate income tax from 30 per cent to 23 per cent next year and to 20 per cent in 2013.

 

He said the Board of Investment was also working on reducing tax incentives when the corporate tax is cut, and this could increase government revenue.

 

A carbon tax should also be imposed on consumer products such as mobile phones, he said. Currently the government does not have much room to expand investment because of limited tax revenues and high public debt, as it cannot eliminate the debt overhang from the 1997 economic crisis.

 

"If the government cannot balance the budget, in the long run it must narrow its budget deficits," Kanit said.

 

Public debt should not exceed 60 per cent of gross domestic product, otherwise rating agencies may downgrade Thailand's credit rating, which would result in higher borrowing costs, said Kanit, who led a research team studying fiscal sustainability.

 

Currently public debt is about 40 per cent of GDP or about Bt4 trillion, down from about 60 per cent during the 1997 crisis.

 

Kanit said that Thailand needs to invest about Bt4 trillion in infrastructure projects over the next five years, but the government has budget about Bt2.42 trillion. The government needs to borrow about Bt1.2 trillion. While state enterprises would contribute about Bt360 billion. The rest is expected to come from private sectors under public-private partnership (PPP) scheme, which amount is too small. The government may try to boost private participation in infrastructure investment by passing a new law to facilitate this, he suggested.

 

The Nation 1st September 2011

[Flashermac]

<< Did the government has compensated state banks that proving loans to village funds,? Thirachai asked. >>

 

 

[radioman]

So what's the game here? Drop corporate tax so companies have more cash to pay the increased minimum wage. Then increase VAT so those with more in their pocket pay more tax on everything they buy. Said tax increase going back to the gov to compensate for the drop in corporate tax. Now you see it, now you don't. Hmm!

[Julian2]

VAT is more about taxing the lower income earners.

Too hard to make them pay income tax, easier to tax them on what they buy.

[cavanami]

Does the VAT really get back to the Thai gov?

 

Many restaurants charge VAT, but me thinks the gov never sees 1 satang of that

[Julian2]

Dunno, I rarely see it added to the bill here, I'll have to start eating in a better class of establishment.

Some of the Farang owned places in Chiang Mai include it and I bet they hand it over.