Government's Plan to Implement Negative Income Tax in 2027 for Welfare Enhancement by the Finance Ministry
The Thai government is set to implement a Negative Income Tax (NIT) system by 2027, marking a significant shift in the country's data infrastructure and welfare policies for citizens and businesses. This ambitious initiative requires every citizen (approximately 60.8 million people) and around 600,000 businesses to file annual income tax returns.
The system necessitates robust taxpayer data collection, processing, and management capabilities to handle the influx of tax filings. To achieve this, the government is enhancing its data infrastructure, developing modern digital platforms such as data lakes or integrated tax databases. These platforms will enable efficient management, verification, and analysis of vast amounts of income and tax data.
The NIT system aims to improve transparency and accuracy in income reporting, helping to integrate the informal economy into the formal tax system, thereby capturing previously untaxed earnings and improving fiscal health.
In terms of welfare policies, the NIT shifts support from generalized categories to an income-based distribution method, providing direct, means-tested cash transfers to low-income earners. This approach aims to reduce poverty and inequality by ensuring only those below the threshold receive support, thereby preventing mistargeting of subsidies.
Businesses will also be affected, as they will need to comply with new tax reporting regulations, promoting formalization and expanded fiscal contributions from the private sector.
The data lake, a crucial component of this infrastructure, will play a vital role in identifying gaps in tax enforcement. For instance, it will help detect businesses importing goods at low rates but declaring higher profits or income. Moreover, the data lake will allow the Ministry of Finance to tailor policies for specific regions, taking into account varying quality of life and security in areas such as the north, south, northeast, and central regions.
The data lake will also provide data on the physical health of the Thai population, in addition to financial data. This integrated approach will enable the government to design more precise and suitable policies for different demographic groups and regions.
Lavaron Sangsnit, Permanent Secretary of the Ministry of Finance, emphasized the importance of the NIT system, stating that it means individuals must file tax returns and receive welfare if their income is below the threshold. He also mentioned that the government needs to explore ways to increase revenue collection.
However, concerns about the risks to the country's fiscal health have been addressed by the ministry. Lavaron Sangsnit acknowledged potential threats to financial stability and assured that the ministry recognizes these risks.
The new welfare system, which aims to consolidate all welfare and tax-related information into one unified database, will be integrated with the NIT system. This integration will allow for targeted budget allocation and ensure fairness in tax collection through cross-checking of data.
It is worth noting that the budget for this year remains the same as last year due to stagnant revenue collection. Despite this, the government is committed to modernizing Thailand’s fiscal and welfare frameworks, strengthening national fiscal health, and creating structural economic changes by formalizing the economy and making welfare payments more efficient and targeted.
[1] Thailand's Negative Income Tax System: A Game Changer [2] Thailand's Negative Income Tax System: Impact on Data Infrastructure [3] Thailand's Negative Income Tax System: A New Approach to Welfare Policies [4] Thailand's Negative Income Tax System: Modernizing the Fiscal and Welfare Frameworks [5] Thailand's Negative Income Tax System: A Step Towards Fiscal Health
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