Kittiratt backs policies to lift economy

Kittiratt backs policies to lift economy

Korn slams plan to cut the corporate tax rate

Economic growth will jump an extra percentage point in 2012 after the new government implements its core policies, Deputy Prime Minister and Commerce Minister Kittiratt Na-Ranong predicts.

The Pheu Thai Party, under Prime Minister Yingluck Shinawatra, has vowed to push forward with its key campaign promises to raise the minimum wage to 300 baht nationwide, slash corporate income taxes and revive the crop mortgage programme to help boost farm incomes.
Mr Kittiratt said once implemented, the measures would help boost the domestic economy and reduce Thailand's long-standing export sector dependence.
This was critical as global economic conditions remain volatile with the United States, Europe and Japan all mired in high public debt and weak economic growth.
Assuming the global environment did not deteriorate significantly, the government expected growth to get a boost in 2012 from its strategies to boost household income and consumer spending and close the income gap.
"We will focus on domestic consumption to drive economic growth over exports, to help reduce the income gap between the rich and poor," he said.
"GDP growth isn't the only answer for achieving economic stability. We must have quality consumption and quality of life to address the country's problems."
The National Economic and Social Development Board in May announced a 2012 economic growth target of 4% to 5%, up slightly from an estimate of 3.5% to 4.5% this year.
"Lower-income earners will be a key group for future economic growth, as when they gain increased income, so their quality of life will increase," said Mr Kittiratt, a former president of the Stock Exchange of Thailand and deputy director at the Sasin Graduate Institute of Business Administration.
Cabinet ministers yesterday approved a draft policy platform including 10 economic priorities such as the minimum wage hike, a new 15,000-baht minimum monthly salary for university graduates and plans to raise farm incomes.
Longer term, the government will focus on policies to strengthen agriculture, industry, tourism, education, social services and sports.
Ms Yingluck said strengthening the domestic economy and raising household incomes represent the foundations of the government's economic policies.
She said the government was reviewing several strategies to help address the current problems of high prices together with plans to mitigate the uncertainties in the global economy.
"We don't want to look at inflation in isolation. What is more important is how to boost the overall economy," Ms Yingluck said.
She declined to offer specifics on when minimum wages could rise, saying that further talks were needed with industry groups and labour representatives. For university graduates, the 15,000-baht monthly starting salary could begin in January for civil service workers, with the private sector making the adjustments as needed.
"I believe the public will see concrete results [from our policies] within the first year. Within six months, you will see progress already," Ms Yingluck said.
Mr Kittiratt said the fiscal 2012 budget, set to begin in October, will be revised to match the government's spending priorities. A revised budget will be presented to the cabinet early next month.
He said Thailand remains committed to prudential fiscal policies, but declined to say whether the budget deficit target, now set at 350 billion baht under the current 2012 budget, will be changed.
"The government will borrow only as necessary," he said, adding that corporate tax reductions, while potentially affecting short-term revenues, will ultimately help boost tax collections as other programmes lead to increased incomes for consumers.
Mr Kittiratt said excise taxes on fuel would also be slashed to help reduce energy costs and contain inflationary pressures within the economy.
He said certain policies initiated by the previous government, such as free electricity, bus and train fares for low-income residents would likely be scrapped as the policies have little benefit in helping promote savings.
Korn Chatikavanij, a deputy leader of the opposition Democrat Party and former finance minister, questioned whether the government's tax policies were in the country's long-term interest.
The bulk of corporate tax revenues were generated by the country's largest listed companies, even as the vast majority of the workforce are employed by small- and medium-sized companies.
"My question is, who gains from tax reductions? How will it impact the behaviour of companies? And what are the expectations?" Mr Korn said.
"If the government cuts taxes while keeping spending unchanged, the result is higher debt. The fact is that [listed] company profits are at a record high. Is it fair to be cutting taxes now? Is this the best use of resources?"
The corporate tax rate in Thailand is fixed at 30%, a rate on a par with the Philippines but significantly higher than the 17% charged in Singapore. The Revenue Department last week estimated that cutting corporate tax to 23% in 2012 and 20% in 2013 as promised by the government would cost 150 billion baht in lost revenue over the next three years.