Negative income tax (NIT) has been long considered to be applicable in Thailand.
The NIT aims to reform the Thai tax structure by providing financial support to individuals with low or no income, while encouraging them to enter the tax system.
The NIT concept is not new in Thailand as it was proposed by the Finance Ministry’s Fiscal Policy Office (FPO) about 10 years ago and was included in the 12th National Economic and Social Development Plan from 2017 to 2021, as well as the National Reform Plan. However, it remained dormant in that plan.
the NIT is dubbed as “Start-Up Money Transfer Policy”.
The NIT is a concept aimed at addressing poverty and social inequality through a liberal approach that encourages people to work. If someone’s income is below a certain threshold, the government allocates a certain amount of tax money to him or her. The NIT concept has been called workfare, where an individual must work and be part of the tax system. For people whose income do not meet the minimum threshold, they receive financial support from the government. This differs from welfare, where individuals may receive benefits from the government without having to work, such as with the current state welfare card. The NIT positively introduced people into the tax system by filing their income for verification. The government may not currently receive tax revenue from this group of people, but in the future, as their income grows beyond the threshold for government support and they earn enough to pay personal income tax, the Revenue Department will have their income data which is very impressive if the expectation is met.
For example, if Mr A has no income, he would receive, say Baht 5,000 in compensation from the government.
Mr B has income of, say Baht 20,000 as the minimum threshold, so he would receive no compensation.
According to the Revenue Code, any individual earning 60,000 baht or more per year are required to file tax forms, even if such individual has no tax liability. In practice, many people do not file taxes despite meeting the legal income threshold.
If the NIT system were to be implemented in Thailand, the tax filing requirements under Section 56 of the Revenue Code requires amendment. The amendment should state that anyone earning even one baht must file a tax form, ensuring that everyone enters the tax system, while granting the Revenue Department the legal authority to verify individuals’ income.
The problems that hold Thailand from this kind of development is the education support to explain the NIT system to the public and gaining acceptance. As this system is linked to the tax system, people may fear being taxed, making it politically difficult to promote.
This includes reviewing various exemptions and deduction measures, as well as minimising unnecessary cost-of-living support measures, such as energy subsidies, to ensure they are essential and beneficial to the economy and society.