A Costly Double Standard

The government is currently using strong medicine in its bid to regain lost international investment in the wake of the violent political unrest. Cabinet recently approved tax measures supporting the establishment of regional operating headquarters, or ROHs, in Thailand. The measures pushed to use unheard of tax breaks aimed at luring foreign money back to Thailand.


Multinational companies have now been presented with practically undeniable incentives to base their regional operations on Thai soil. ROHs have done wonders for countries such as Singapore and Malaysia and it is obvious now that the Thai government wishes to reap the same benefits.

The administrations 'strong medicine', however, includes measures such as doing away with the taxation of foreign profits entering the Kingdom for 10 years. Before, ROHs had to pay 10 percent for any foreign made revenue passing through Thailand. Domestic profits for foreign businesses with ROHs in Thailand, as well, have had their taxation cut from 30 percent to 10 percent for the next 10 years. Foreign employees coming to work at the regional offices have had their privilege of 15 percent income tax extended from the standard four year period to eight years. All of these measures came into effect this past June 1st in time to couple with other accommodations already in place for international enterprises.

The cost of persuading foreign business back to Thailand with these measures will be 4 billion baht in taxes a year, minimum, which is a relatively comfortable loss considering expected benefits. The drive in concept is admirable and will likely prove effective. What the government has failed to factor into its scheme, however, is how domestic businesses will view the blatant double standard.
Thai businesses currently have to pay 37 percent in taxes when exceeding 4 million baht in revenue a year. Any enterprise making a humble 333 thousand baht a month has to pass on close to 40 percent of its intake to the state. Has the government put foreign business on such a pedestal it no longer considers domestic business of any use? Why have no tax measures been formulated for businesses in Thailand itself? Does the government not want domestic investment? All of these questions can only be summarized into whether or not the administration is exercising a double standard.

Post Today Editorial, June 4 2010B
By: TAN network