TRA reaffirmed the special tax break for taxpayers drove a shopping spree and stimulated the Thai economy and the higher-than-expected retail growth.

06 Jan 2016,   in CORPORATE NEWS
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TRA reaffirmed the special tax break for taxpayers drove a shopping spree and stimulated the Thai economy and the higher-than-expected retail growth.


The Thai Retailers Association (TRA) noted that the special tax break for individual taxpayers, which allows a deduction of up to 15,000 baht from buying products and services from their taxable incomes, has encouraged Thai people to do more shopping during the last seven days of 2015. The tax break measure is expected to boost the local economy and the full-year retail business growth by 3.05% last year, up from 2.8% in an earlier forecast.

Miss Jariya Chirathivat, president of TRA, said this special tax break is one of the government’s New Year gifts for Thai people, stimulating individual taxpayers to buy products and services during Dec 25-31, 2015, from retailers and product producers registered in the value-added-tax (VAT) system. The tax deduction up to 15,000 baht has boosted consumer purchasing power, being a good sign of economic improvement.

Earlier, the government also imposed another measure to allow the deduction of up to 15,000 baht for individual taxpayers who spent on hotel accommodations and other services from tourism operators during Dec 16, 2014-Dec 31, 2015.

Both tax break measures will together allow individual taxpayers to deduct up to 30,000 baht and drive the overall economy, encouraging consumers especially the middle-class to shop more.


The TRA has its opinion toward the tax break measure and the impact on retail business in 2016 as following;

  1. The tax break measure allowing the deduction of up to 15,000 baht from shopping products and services during Dec 25-31, 2015, together with another deduction of up to 15,000 baht from hoteliers and travel packages and services from registered tourism operators will allow individual taxpayers to deduct a maximum of 30,000 baht from their taxable income. So, this special tax break was a “right measure” imposed at “right place” and “right timing”.

Those who will benefit from this special tax break will be around 3.2 million people from the total 9.6 million taxpayers (the figure in 2013). These 3.2 million people have strong purchasing power and the measure will stimulate consumption through retail operators, including retailers, wholesalers, restaurants and food outlets in the VAT system. These channels will create the money circulation in the entire economy for 2-3 times as the trade sector hires 3.5 million direct and indirect workforces and has related people in the supply chain over 1.5 million households.

  1. The tax break measure took effective in the “right place” to boost domestic consumption, targeting middle- to high-income people who still have strong purchasing power. So, their spending on product purchases and services would move forward the economy and create jobs and distribute income to provincial areas. This shopping for Thailand measure would improve the economic sentiment, restoring people confidence toward the outlook and encouraging them to spend more. It is predicted that the shopping spree during the New Year celebrations rose 20% or worth 25 billion baht and pumped 125 billion baht into the entire economic system in the last month of 2015. When consider the benefit from both tax break measures, the retail business could see an additional growth of 0.3%, making the entire sector expand 3.05% in 2015, higher than an earlier forecast of 2.8%.

For durable goods like electrical appliances, hardware and sporting goods, they got higher benefit because they have higher values and are expensive while consumers are waiting to buy some digital devices or mobile phones for their own gifts or for family members. For non-durable goods, they are essential for daily use and expected to get less impact when compared to other product categories.

    1. The tax break measure to boost shopping spree targeted individual taxpayers in the VAT system and retailers and product producers and distributors must issue the purchase invoice with VAT. According to World Bank, Thailand is expected to earn tax revenue at 21.35% of the country’s gross domestic product (GDP) but it has collected only 16.02% of GDP in the past few years. The study of tax structure found that there are only 327,127 companies and partnership entities registering under the corporate income tax system, representing only 12% of 2.7 million business operators registered at the Department of Business Development. This special tax break measure has a strategy to convince business operators to enter the tax system while individuals are willing to enter the personal income tax system as well.

    So, this short-term tax break measure was imposed at the right timing to boost the shopping bonanza during Dec 25-31, 2015, when Thai people liked to buy New Year gifts for themselves and their loved ones. Most of business companies have already purchased presents and gift baskets for their customers. It was the seven-day peak period for personal consumption and this measure has stimulated the shopping mood, maximizing the maximum effect for shopping. Just a few days after New Year, taxpayers can benefit from their shopping as they can get the deduction from their taxable income when they file the personal income tax payment. So, this measure is dubbed as “shopping right now to get tax deduction in a short period of time”.


    Retail index by the Thai Retailers Association in 2015

  1. During the first nine months of 2015, the Thai economy has focused mainly on the reform while the export has fallen sharply, so a number of economic policies and measures could not drive the entire economy as expected. The TRA forecasted in the fourth quarter that the retail growth in 2015 would be 2.8%, down from 3.2% in 2014.
  2. From September, the government’s stimulus measures could boost up the economy by more than 136 billion baht, by helping low-income people who have weak purchasing power. The measures helped distribute income through village funds, which is considered a right measure even the fund was just only 136 billion baht or only 0.7% of GDP.
  3. The benefit from the tax break measure to boost shopping spree has restored consumer confidence and boost shopping mood. It is expected that this measure boost spending during the New Year celebration by 20% or 25 billion baht, pumping money into the overall economy by 125 billion baht.
  4. Combined benefit from two special tax break measures (shopping and tourism) are estimated to help the retail business grow 3.05% in 2015, up from 2.8% forecast earlier.
  5. The economy outlook in 2016 will be better than 2015. The government will focus on government spending mostly on mega infrastructure projects and encourage private sector to invest more. For the retail business, it will depend on local consumption, which is expected to take some times to create jobs and distribute income to the grassroot level.


The TRA’s suggestions for the government

  1. It is the first time in 20 years for Thai retail operators from small, middle to big scale and from department store, hypermarket, supermarket to convenience stores as well as small shops both Thai and foreign brands facing the slowing or negative growth. This is due to the weak purchasing power in some consumer groups, decreased consumption and a decline of money circulation the overall economic system.
  2. The government should speed up its investments on infrastructure projects to create new jobs and incomes because purchasing power of middle to low-income people especially farmers and workers, the major population group, remains weak. If the megaprojects such as the digital economy, the special economic zone, the high speed train and double-tracked train are delayed, the income from new jobs and employments will be delayed as well. This will drag on weak local consumption.
  3. The government should impose some measures to boost local consumption by focusing on middle- to high-income people who still have strong purchasing power. For example, the tax break measure to boost shopping spree is good to encourage spending in the provincial areas. When people spend more, there will be new job and income creation in provinces and it will eventually boost consumption of people in upcountry. TRA suggested a measure that the government should allow individual taxpayers to file their personal income tax payment for the first half of the year, so they can get back some taxes if they have within August. So, they can use the tax refund money for shopping in the future.
  4. The government should restore shopper confidence and create shopping mood by having some shopping campaigns during the low season. It should be a joint collaboration from the tourism, hotel and retail sectors to boost spending from Thai people and foreign tourists.
  5. As the tourism is now only the growth engine to drive the Thai economy, the government should consider reducing import tariff for luxury brand-name products to attract more shopping from foreign tourists. At the same time, the lower import tax will encourage Thai consumers to shop more brand-name products. According to the Global Blue survey in 2012 and 2013, Thais were ranked sixth when claiming tax refunds on overseas shopping. This is huge money and if we can attract this group of people to shop in the country, it will benefit the economy.
  6. The government should consider using the VAT refund measure to encourage tourists to shop more in Thailand. This should be done in two ways. Firstly, the tax refund for tourists should be done immediately at the point of sales. Another is the zero VAT should be applied for foreign tourists who make a minimum purchase of products and services.
  7. The government should promote other operators to run duty free shops at major airports and in downtown areas. Currently, there is only one duty free shop operator in Thailand. The government should support by having pick-up counters at major airports when tourists buy duty free products in downtown shops. This measure is expected to benefit the tourism industry.