Government mulls first stock market transaction tax in 30 years to narrow budget gap

The Stock Exchange of Thailand in May 1975. The government is considering the first tax on stock market transactions in more than three decades. (Bangkok Post file photo)

The government plans to tax stock trading for the first time in more than three decades, while making crypto traders participate with a share of their profits, as the government seeks revenue to fund billions of dollars in emergency relief. of pandemic.

Prime Minister Prayut Chan-o-cha’s administration is expected to decide by the end of January on the method and rate of taxing stock market transactions, as well as details on how to tax gains from stock trading. digital assets, including cryptocurrencies, according to Finance Minister Arkhom Termpittayapaisith.

The government is seeking new sources of revenue to fund Covid stimulus and reduce reliance on borrowing as Southeast Asia’s second-largest economy continues to recover from the pandemic.

Trading in stocks and digital assets has surged during the pandemic as investors seek higher returns amid record high interest rates, opening up new fiscal avenues for the government.

“Due to the Covid-19 outbreak, general government revenue has diverged from expenditure since 2020, and the impact appears to be permanent,” said Charnon Boonnuch, an economist at Nomura Holdings Inc in Singapore.

“This suggests that the government will likely seek to expand its sources of revenue beyond the proposed digital asset tax and recent e-commerce tax, to accommodate increased spending and provide policy space. for increased fiscal support to countries with still-weak economic prospects if needed.

Thailand’s tax revenues are lower than most other developing economies, limiting the government’s ability to increase spending to counter the economic downturn. The country’s tax-to-GDP ratio was 16.1% in 2019, compared to 18.4% for upper-middle-income countries and 24.2% for high-income countries, said Athiphat Muthitacharoen, associate professor at the Chulalongkorn University and author of “Strengthening Thailand’s Tax System.”

Tax breaks

While many countries, including Indonesia, have increased their value added tax in recent years to broaden the revenue base and limit budget deficits, the government reduced the VAT rate from 10% to 7% in 1999 and has maintained it at this level forever. because. The country also offers many tax breaks to attract investment and help businesses.

The finance minister called for measures to broaden the tax base, but the prime minister warned against levies that would discourage the adoption of innovative fintech. The decision to tax stocks and cryptocurrencies has already been opposed by the industry.

The revenue department is accelerating discussions on the proposed crypto tax, and its decision will be fair to investors and other stakeholders, chief executive Ekniti Nitithanprapas said in a January 10 statement.

Net revenue collection was below its target of 11.5% in the fiscal year ended September due to weakening economic activities and tax measures extended to businesses and people affected by Covid, according to the official data. The overall fiscal deficit is expected to narrow to 6.5% of GDP in the current fiscal year from 9.9% 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 taxes before the general election,” Mr Atiphat said. “Taxation is going to be one of the biggest issues over the next five years.”

Garland K. Long