A 15% withholding exemption on interest income faces the axe because of a loophole exploited by rich depositors
Finance Ministry takes on depositors who avoid tax on interest
The Finance Ministry is poised to abolish a 15% withholding tax exemption on interest income of up to 20,000 baht a year after some millionaires exploited a loophole to avoid paying tax.
The tax waiver, which the Finance Ministry intended as an incentive to encourage people to save more, has been used by the rich to avoid tax legally, said Finance Minister Apisak Tantivorawong.
He said a practice has developed in which bank officials tell depositors to withdraw money from an account when the earned interest approaches 20,000 baht. Depositors then open a new savings account to avoid tax payment.
Although the Revenue Code offers a tax waiver for up to 20,000 baht paid as interest per year, some banks refrain from withholding the tax as long as depositors earn less than the 20,000-baht threshold, regardless of how many savings accounts depositors have open at other banks at the same time.
Mr Apisak, a former president of Krungthai Bank, has assigned the Revenue Department to find a way to close the loophole. The tax-collecting agency has proposed to two options: scrapping the tax exemption altogether, or letting authorities supervise banks and warn them against providing such advice.
Separately, the Finance Ministry has urged the Office of Insurance Commission to let insurance firms use a liquidity surplus for long-term investment, particularly in the imminent Thailand Future Fund, given that the fund carries low risk because state projects will be used as the underlying assets of the fund.
In other tax matters, Deputy Finance Minister Wisudhi Srisuphan said policymakers will try to strike a balance between current and new taxpayers when the land and buildings tax takes effect.
A National Legislative Assembly (NLA) committee is cautiously considering whether those who pay the existing house and land tax and local development tax can afford the new land and buildings tax, Mr Wisudhi said.
The new tax, which will replace the outdated house and land tax and the local development tax, aims to narrow income disparity, expand the national taxpayer base, increase tax income for local administrations and improve land use.
Even though the cabinet approved a draft of the land and buildings tax in March, the much-awaited bill is stuck in NLA deliberation because lawmakers have questioned whether a 50-million-baht ceiling for the tax exemption for first homes proposed by the Finance Ministry is too high and should be lowered to broaden the tax base.
Some NLA members view the waiver as unfair because those who own more than one residence are subject to the tax even if their homes’ combined value is less than the 50-million-baht threshold for the first home.
Mr Wisudhi said the NLA has decided to cut the maximum tax exemption for the first home to 20 million baht.
According to a recent survey, households who own homes valued at more than 20 million baht represent a mere 0.09% of all families, while households owning land worth more than 20 million baht account for 0.34%.