One-tier corporate tax pushed

A single-tier corporate tax system would simplify the taxation process for investors, but political stability remains the main factor in attracting foreign direct investment (FDI), says Deloitte Touche Tohmatsu Jaiyos Advisory Co. 

Tax paid by a company on its chargeable revenue would be the final tax, while dividends paid to shareholders would be tax-exempt for the company.

Thailand’s corporate income tax stands at 20%, but companies are also subject to a 10% withholding tax for dividend payments.

Simplified tax calculations to facilitate investment incentives are a main advantage of the one-tier corporate tax system, said Mr Loh.

He pointed to Malaysia and Singapore as two Asean members that had already adopted such a system.

However, tax incentives are not the primary factor attracting most investors, said Mr Loh, citing Britain’s well-equipped financial facilities such as its clearing house system and varied derivatives.

"What we should focus on is addressing how we can attract investors to conduct business here, as tax incentives are just a supporting factor," he said.

"Domestic political stability is the primary incentive to attract foreign investment inflows, followed by infrastructure that can support investment clusters and then adequate skilled labour."

Mr Loh emphasised stability and a clear direction for governance were the criteria looked for the most by foreign investors and pointed to Indonesia's political upheaval from 1997-2002 as a hindrance to FDI there.

As to whether corporate income tax should be increased if a one-tier corporate tax system were put in place, he said that would depend on the Finance Ministry's assessment of whether tax revenue was meeting targets.

Source: Bangkok Post