Thailand set to tax cryptos, stock trading to cut budget gap

[BANGKOK] Thailand is considering taxing stock trading for the first time in more than 3 decades, and making crypto traders part with a share of their profits, as the government hunts for revenue to fund billions of dollars in pandemic relief.

Prime Minister Prayuth Chan-Ocha's government is expected to decide by end-January on the method and rate of taxing stock trading, as well as details on how to tax gains from trading digital assets including cryptocurrencies, according to Finance Minister Arkhom Termpittayapaisith.

Thailand is seeking new sources of revenue to finance Covid stimulus measures and cut reliance on borrowing as South-east Asia's second-largest economy continues to reel from the pandemic.

Trading of stocks and digital assets has surged during the pandemic as investors chase higher returns amid record-low interest rates, opening up new tax avenues for the government.

"Due to the Covid-19 outbreak, general government revenue has been diverging from spending since 2020, and the impact appears to be permanent," said Charnon Boonnuch, an economist at Nomura in Singapore.

"This suggests that the government will likely look to expand its revenue sources further and beyond the proposed tax on digital assets and the recent e-commerce tax, to accommodate an upward shift in spending and provide a scope for more fiscal support to the still-weak economic outlook if needed."

Below are tax proposals the government is mulling, according to local media: Thailand's tax revenue is lower than most other developing economies, limiting the government's ability to boost spending to counter the economic slowdown.

The country's tax-to-GDP ratio was at 16.1 per cent in 2019, compared to 18.4 per cent for upper-middle income nations and 24.2 per cent for high-income nations, said Athiphat Muthitacharoen, an associate professor at Chulalongkorn University and the author of "Strengthening Thailand's Tax System."

While many countries, including Indonesia, have raised their value-added tax in recent years to expand the revenue base and rein in budget deficits, Thailand cut its VAT rate to 7 per cent from 10 per cent in 1999 and has maintained it at that level ever since. Thailand also offers many tax rebates to lure investment and help businesses.

The finance minister has called for steps to broaden the tax base, but the prime minister has cautioned against levies that will discourage the adoption of innovative financial technology.

The move to tax stocks and cryptocurrencies already has been opposed by the industry. The revenue department is expediting discussions on the proposed crypto tax, and its decision will be fair to investors and other stakeholders, director-general Ekniti Nitithanprapas said in statement on Jan 10.

Thailand's net revenue collection fell short of its target by 11.5 per cent in the fiscal year ended September because of weakened economic activities and fiscal measures extended to Covid-hit businesses and people, official data showed.

The overall fiscal deficit is seen narrowing to 6.5 per cent of the GDP in the current fiscal year from 9.9 per cent a year earlier, according to Nomura.

"Thailand hasn't made any major moves on tax collection for decades and it will be difficult to raise any taxes ahead of the general elections," Athiphat said. "Tax will become one of the key problems over the next five years."

BLOOMBERG