TAXATION / Low business costs the best incentive
Written by Writer on Monday, November 10th, 2008
TAXATION / Low business costs the best incentive
WICHIT CHANTANUSORNSIRI
Tax incentives and legal reforms should be taken to help draw new investment to the country, according to PricewaterhouseCoopers. ”The government has implemented many policies in an effort to attract foreign investment,” said PWC partner Peerapat Poshyanonda.
”But in reality, these measures have not had a significant impact, as there remain legal and tax obstacles that have yet to be addressed.”
Mr Peerapat said reforms that helped reduce business costs, particularly in the current environment, would have a greater impact on investment and business sentiment.
He said one example was the policy aimed at encouraging Thai companies to invest abroad. Even as the government aims to push companies to expand overseas, tax regulations act as a constraint.
Mr Peerapat said that if a firm invested in a country with a double taxation treaty with Thailand, it would be exempt only if taxes in the overseas country were higher than 15%. If taxes are lower, then the company would be subject to the difference between foreign tax rates and Thailand’s corporate tax rate of 30%.
He noted that Singapore, in an effort to support offshore trading, offered lower corporate income taxes from the normal 18% rate for firms establishing production bases abroad.
Another example of a clear tax barrier was how the Revenue Department assesses taxes for services such as the advertising industry.
An advertising company that produces an ad is charged value-added tax on revenues collected not just in Thailand, but also in other countries where the ad is shown. In contrast, Singapore collects tax only on the service revenues collected within the country.
”In the end, the [Revenue Department] might end up not receiving any tax at all from this industry, as multinational companies shift to invest elsewhere,” Mr Peerapat said.
Policies to create a national shipping fleet also seem unlikely to ever come to fruition due to the country’s tax rules, such as the allowance for deductions only activity for activity occurring within the country. A ship travelling from Bangkok to Hong Kong, and then later to a third country, for instance, can deduct only tax claims arising from the first leg of the voyage.
Thavorn Rujivanarom, a lead partner of PWC, said Thai companies would face considerable pressure in 2009 as a result of the global recession.
Controlling costs was critical for every business, and careful tax planning could have a considerable impact on a firm’s bottom line, he said.
PWC will hold its 10th annual conference under the theme ”Road to Recovery: Maximise Shareholder Value through Effective Tax Planning” today and tomorrow at the InterContinental Hotel. For more information, contact PWC at 0-2344-1000, ext 4208.
Bangkok Post
Monday November 10, 2008
