New Property Tax in Thailand hopes to narrow income disparity

The income disparity between the rich and the poor became one of the major grounds for social injustice, following the current anti-government demonstrations in the Kingdom. In attempts to narrow the gaps, the Thai government is enforcing Property Tax in hopes of creating opportunities and improving the livelihood for low-income earners.

The Cabinet on 20 April 2010, approved in principle the property tax bill. The new property tax will affect landlords and house-owners, who currently pay no land and building tax or Land Development tax. The new ceiling rates were discussed and is expected to be revised every four years. The rates are 0.5% for property, 0.05% for farmland and 0.1% for residential units. The landlords are given three years to make use of the land that they own before the tax rates of unused land double. The rates are yet to be approved by the Cabinet. The tax measures are expected to stimulate the use of land, preventing corruption and profit speculation on land. The price of new houses may rise, as a result, due to the tax burden.

According to Finance Minister Korn Chatikavanij, the new tax will exempt farmers and benefit urban low-income earners who own a small plot of land, under an appointed measure of land stated. Mr Korn explained in detail that farmers who are registered under the government’s income guarantee scheme do not have to pay tax, as the property tax bill avoids tax collection from the poor. Even though the bill will affect a majority of wealthy individuals, Mr Korn was confident that the law will receive a positive response, as it promotes fairness, following the government’s reinforcement of understanding to all sides.

The property tax provides a leeway for rural farmers and low-income earners to improve their livelihoods. The property tax collected will proceed to the Land Bank Fund, an idea established by Prime Minister Abhisit Vejjajiva. According to acting director of the Fiscal Policy Office FPO’s legal division, Lavaron Sangsnit, the bank will buy unwanted land plots and redistribute it the poor.

The fund will be overseen closely by the Prime Minister’s Office. The new property tax gives opportunities to local administrations organizations where the central government cannot reach. Mr Lavaron said that the property tax will empower local administrations to collect the taxes for development purposes in the area. The FSO legal division acting director said that the local governments are given more freedom, to spend the money as before there were certain constraints under the various regulations of the central government. The property tax law will still have to undergo a series of public hearings and approval by a Council of State, the legal department and the Parliament before it becomes a law.

According to Mr Korn, it can take up to two years before the bill becomes a law, and two more years for actual enforcement. The property tax law provides a huge stepping stone in propelling future laws and policies that will make positive changes, improving lives of Thai citizens that are in need, giving hope that it can patch the social divide embedded in Thai society.

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