The Thai government’s recent consideration of expanding the value-added tax (VAT) base, even after Mr. Pichai Chunhavajira, the Minister of Finance, ruled out immediate changes for businesses earning under 1.8 million THB annually, has raised concerns among small and medium-sized enterprises (SMEs) and the restaurant industry.
Under the current legal framework, businesses earning over 1.8 million baht per year must register for VAT at a current rate of 7%. This threshold has remained unchanged for decades, despite evolving economic conditions. Proposals to lower the VAT threshold or introduce a reduced VAT rate for smaller businesses have prompted fears that such reforms could place additional strain on SMEs already facing low consumer demand, high competition from imports, and informal market activity.
Mr. Sangchai Theerakulvanich, strategy chairperson of the Federation of Thai SMEs, cautioned against introducing new VAT tiers or lowering the threshold. Instead, he recommended increasing the registration threshold and offering incentives to encourage voluntary compliance. Suggested measures include subsidies for digital systems, VAT refunds for business development, and temporary exemptions from income tax. Importantly, he emphasized the need for a tax amnesty law to protect new VAT registrants from retrospective audits.
In parallel, the Restaurant Association expressed concern about the impact of any new VAT collection on small food businesses. President Chanon Koetcharoen warned that increased VAT could further depress sales, particularly for local and street food vendors, as customers are often sensitive to added costs. He proposed that the government educate operators on compliance, delay new VAT policies, and implement supportive measures such as tax deductions for diners and regulation of high delivery platform fees.
Both industry groups agree that any VAT reform must strike a balance between fiscal goals and economic realities. Legal certainty, fair thresholds, and transitional support are essential to ensuring successful implementation without undermining vulnerable sectors.
Proposed VAT Expansion Sparks Concern Among Thai SMEs and Restaurant Operators_Bangkok Global Law