Thailand’s Prime Minister Paetongtarn Shinawatra has added her voice to the growing concerns regarding the Finance Ministry’s suggestion to raise the value-added tax (VAT) from the existing 7% to 15%.
When asked about the proposed rate increase, she acknowledged the potential difficulties it could pose: “I understand the plight of the people if VAT were to be raised.”
She mentioned that Finance Minister Pichai Chunhavajira will soon provide further details on the proposal.
Minister Pichai, who also serves as Deputy Prime Minister, clarified on Wednesday that the Ministry is currently exploring the possibility of a VAT increase.
“We are studying the global tax trend and looking at the potential benefits and drawbacks to ensure the best outcomes for the public,” Mr. Pichai explained.
Since 1992, VAT has been a significant revenue source for the government, remaining fixed at 7%. However, there have been previous proposals to increase it to 10%.
Mr. Pichai emphasized the importance of public input before any decision is made. “We need to gather opinions from various sectors because a VAT increase would impact people,” he said.
He further discussed these points during his speech at the Sustainability Forum 2025 in Bangkok on Tuesday.
At the forum, he also highlighted global tax norms, referencing the Organisation for Economic Co-operation and Development (OECD) tax guidelines which recommend a 15% corporate income tax for all businesses.
He suggested that Thailand should consider lowering its current 20% corporate tax rate to align with this standard.
On the topic of personal income tax, Mr. Pichai pointed out the intense global competition for skilled workers and noted that many countries have reduced their tax rates, whereas Thailand still imposes a high rate of 35%.
He observed that while Thailand’s personal income tax base is relatively low, its consumption tax base is quite high, suggesting a need for adjustments.
Thailand’s VAT rate stands at 7%, capped at 10%, while globally, VAT rates vary between 15% and 25%.
“Consumption taxes are a sensitive issue. However, if we increase the rate in a reasonable and appropriate manner, it could serve as a tool to help low-income individuals,” said Mr. Pichai.
“The gap between rich and poor would narrow because we would collect taxes based on the same base for everyone.”
“If we set the rate low, everyone pays less, and the total revenue collected would be lower. If the rate is increased, wealthier individuals would pay more according to their spending, and the overall revenue would increase.”
“This money could be used for measures to assist low-income people and for building infrastructure to enhance the country’s competitiveness.”
He added that the government should also focus on increasing savings, especially given Thailand’s aging population. Although there are provisions like social security and provident funds, these resources could quickly dwindle after retirement.
Lavaron Sangsnit, the permanent secretary for finance, argued that reforming the tax system requires strong political resolve and should only be considered when the economy has sufficiently recovered. “Timing is crucial,” he stated.
Sirikanya Tansakun, deputy leader of the People’s Party, expressed her opposition on X, highlighting the disproportionate impact on salary earners and the middle class: “Is a 15% VAT increase too much?”
Thanakorn Wangboonkongchana, deputy leader of the United Thai Nation Party, also criticized the proposal, warning that it could lead to higher prices for goods and services.
On September 17, the cabinet decided to extend the 7% VAT rate for another year, aiming to soften the blow of rising living costs and stimulate consumer spending.
Government spokesman Jirayu Houngsub explained that the extension, set at 6.3% excluding local taxes or 7% including them, will run until September 30, 2025. The move is designed to alleviate the financial strain on consumers, boost spending, and reinforce business confidence in the Thai economy.
