Leading the Way is a column written by PwC's professional staff. It appears in the Business section of the Bangkok Post twice monthly. The column provides specialised advice to corporate decision-makers in Thailand on global and local business trends.
This article appeared in the February 21, 2012 issue of the Bangkok Post.
By Ornjira Tangwongyodying and Chompunut Sirikul
When one thinks of the word "taxes", the Revenue Department is what often comes to mind, since it is the government agency that handles the collection of taxes. Since taxes are the main source of income for the government, the Revenue Department is under constant pressure to collect as much as possible in taxes. In 2012, the government expects the department to collect 1.624 trillion baht in taxes. Historically, the department has been able to collect more than what was expected.
However, the department will face new challenges soon. Thailand has just emerged from one of the worst flood crises in history, and some taxes have been cut to help the victims. And the new, lower corporate income tax rate will also take effect this year. However, over the next two years, the government expects the department to collect no less than 3 trillion baht based on this year's figure, a 7% increase from the preceding year. Taking all these into account, it would be interesting to look at the policies that the department will adopt to meet the goal.
One of the moves we expect the Revenue Department to make would be to inspect withholding tax details more thoroughly. It plans to issue a new regulation that requires value-added tax (VAT) operators to submit an input and output tax report when submitting their VAT returns each month. This will enable the department to trace the entire process of a transaction, ensuring that the right amount of tax is paid and increasing the efficiency of the tax collection process.
To increase the efficiency of the tax return process, the department also plans to encourage taxpayers to submit tax returns via the internet by expanding and upgrading its IT infrastructure. The new system will improve both the efficiency and effectiveness of tax collection since it will allow the department to access information from the databases of the Department of Business Development (DBD), the Customs Department, the Excise Department and Social Security Office. One of the first steps towards this is the regulation that became effective on Feb 1 this year that requires all taxpayers _ individuals, corporations and juristic partnerships _ to use the 13-digit identification number instead of the 10-digit identification number that is used currently. The new 13-digit identification number must be used for the tax return forms, withholding tax certificates and also when submitting documents to the department. This is the starting point that will allow the Revenue Department to connect to the DBD and Social Security databases. The links will increase the capability of the department's intranet. Additionally, it will make it possible for the department to analyse and cross-check each item in the tax return to ensure that the figures shown in the tax return are in accordance with the regulations. Once the new intranet system is stable, the director general of the department wants to ensure that the accuracy of the tax return is checked at the starting point: when the tax return is submitted to the Revenue Office in each area. The revenue officials will perform an initial check by seeing whether the information on the tax return matches that from the database.
To reduce the likelihood of tax assessment and increase the chance of winning an argument against any such assessment, it is vital that companies keep updated on the latest tax regulations and interpretations of the department and the Courts, adhere to the relevant tax regulations, and properly account for all their transactions. They should also regularly check the accuracy of their returns to prevent an error that could trigger a tax investigation.
Ornjira Tangwongyodying, Partner and Chompunut Sirikul, Manager in Tax Dispute Resolution Services of PwC Thailand. We welcome your comments at firstname.lastname@example.org