Thailand considers tax reforms to boost investment, economic equity

The Finance Ministry has announced ambitious plans to overhaul Thailand's taxation system, with proposed reforms targeting corporate income tax, personal income tax, and value added tax (VAT) to enhance economic competitiveness and reduce income inequality.

In a keynote address at Sustainability Forum 2025 on Tuesday, Finance Minister Pichai Chunhavajira outlined the government's comprehensive tax-reform strategy. The proposed changes include significant reductions in both corporate and personal income-tax rates, alongside a potential adjustment to the current VAT rate.

Key Proposed Tax Reforms

1. Corporate Income Tax: The government is considering reducing the corporate income-tax rate from 20% to 15%, aligning with the Global Minimum Tax (GMT) framework. This aims to make Thailand more attractive to international investors and bring the country in line with global taxation standards.
2. Personal Income Tax: A dramatic proposal suggests lowering the personal-income-tax rate from 35% to 15%. The primary objective is to incentivise skilled professionals to work in Thailand, potentially attracting global talent to the country's growing economy.
3. Value Added Tax (VAT): Currently, Thailand levies a 7% VAT rate, significantly lower than the global standard of 15-25%. The ministry is exploring options to increase this rate, acknowledging the potential sensitivity of such a move among the general public.
    

Pichai emphasised that while VAT increases might be challenging, they could serve as a crucial tool for reducing economic inequality. The proposed reforms are part of a broader strategy to create a more sustainable and equitable economic environment.

The Office of Fiscal Economics (OEF) and the Revenue Department have been tasked with conducting a detailed study of these proposed changes. Pichai has personally overseen the initial stages of this comprehensive tax-reform initiative.

International comparisons reveal the context of these proposed changes. While Thailand currently collects 7% VAT (against a prescribed 10%), neighbouring Singapore charges 9%, and European countries typically range around 20%.

The government says its proactive approach signals a commitment to modernising Thailand's tax system, balancing the need for increased revenue with the goal of maintaining economic attractiveness and supporting sustainable business growth.

Final details of the tax reforms are yet to be confirmed, with further announcements expected as the study progresses.