BANGKOK: 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 would allow about 3.7 million taxpayers to deduct 30,000 baht (US$96) each from their total taxable income and would cost the government 11 billion baht, Deputy Prime Minister Supattanapong Punmeechaow told reporters in Bangkok. The proposal, approved by the Centre for Economic Situation Administration headed by Prime Minister Prayuth Chan-Ocha, would 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. South-East 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 programme worth US$60bil 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 yesterday with the SET Commerce Index jumping as much as 1.9%, the most since Sept 15.
The latest tax breaks and co-payment programmes could together deliver a 200 billion baht boost to the Thai economy in the final quarter, Supattanapong said. — Bloomberg