The cut, part of a broad stimulus package that includes populist spending measures and accelerated infrastructure projects, was endorsed at a weekly cabinet meeting, a government spokesman said. The mix of tax cuts and credits for companies and individual Thais would encourage consumers to spend and domestic businesses to invest and expand, Finance Minister Surapong Suebwonglee told reporters after the meeting. The package was approved a day after the Bank of Thailand scrapped capital controls which scared off foreign investors, when they were imposed in late 2006 to rein in a surging baht. “With these two stimulus decisions, we can expect the economy to grow six percent this year,” Surapong said, compared to the state planning agency’s 2008 GDP growth forecast of 4.5-5.5%. “Apart from these measures, we will gradually take other actions to boost the economy,” he said.
There was little reaction on the main stock index, which was nearly flat at the midday break as most investors had already factored in the widely expected tax measures, dealers said. “The corporate tax cuts should be somewhat positive for listed firms, especially for small companies which have a lower net profit base,” Thanachart Securities analyst Pichai Lertsupongkij said. The new government, dominated by supporters of ousted Prime Minister Thaksin Shinawatra, has promised to revive economic growth slowed by two years of political strife and a 2006 coup.
The tax measures would also benefit the property and housing sector by reducing land ownership registration and transfer fees sharply, Surapong said. Annual income tax for office workers, especially those in low income brackets, will benefit as well. More generous tax exemption allowances will be offered for retirement savings, life insurance and parental support. A Finance Ministry official told reporters on Monday the stimulus package would reduce tax revenues by 40-45 billion baht ($1.3-1.4 billion) a year, but that would be more than offset by faster economic growth. A Reuters poll in February showed analysts expect 2008 GDP growth of 4.6%. (Reuters)
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