Revenue Department’s director general Ekniti Nitithanprapas said yesterday that Finance Ministry departments expect to finalise the draft on tax incentives for shopping early next month before seeking Cabinet approval.

“We will come up with a package that will boost domestic spending in the last month of this year. However, it will not be not the same as the previous two years, now that we have more details,” he said.

The investments included Bt24.72 billion for a double rail system from Lopburi to Pak Nam Pho in Nakhonsawan province, followed by Bt85.34 billion on a rail route from Denchai to Chian Rai and Chiang Kong, Bt26 billion for the double rail system from Jira to Khon Kaen province, Bt29.44 billion on the double-rail tracks from Mab Ka Bao to Jira, Bt17.29 billion for a double rail system from Prachuap Khiri Khan to Chumphon, Bt20.04 billion for the double rail route from Nakhon Pathom to Hua Hin, and Bt10.23 billion for a double rail system from Hua Hin to Prachupa Khiri Khan province.

Figures in the October trade report also show that overall export growth has rebounded from the previous month’s decline, expanding by up to 8.7 per cent month on month.

“From this positive result, we will maintain the 8 per cent annual export growth target for both 2018 and 2019,” the director-general of the Commerce Ministry’s Trade Policy and Strategy Office, Pimchanok Vonkorpon, told a press conference yesterday.

“After measuring up the negative and positive impacts of the ongoing trade war between the US and China, we have calculated that Thailand’s exports have benefited from this economic conflict to the value of $146 million,” she said.

Various Thai exports to the US have increased as they replaced the former Chinese products that are now under heavy tariffs. For example, export of automobiles and parts to the US have increased by 26.1 per cent, while that of steel products increased by up to 89.2 per cent in October.

However, the director-general cautioned that the trade war will only lead to short-term benefits and that in the long run, it will be harmful to trade, investments, the stock market and the capital flows of Thailand. She noted the trade war had also resulted in the reduction of various Thai exports to China, such as that of automobiles and parts, which fell by 12 per cent, and that of computer parts and circuits that fell by 18.4 per cent in October.

“The real harm of the trade war is not the reduction in export growth month on month, but the uncertainty and loss of confidence by investors that comes with the economic conflict. If this trade war escalates further, investors will be reluctant to make large-scale investments and the stock market will continue to grow more volatile, as we have seen so far this year,” she said.

Meanwhile, Thailand’s exports in October 2018 rebounded from last month’s contraction with a value of $21.8 billion, growing by 8.7 per cent month on month.

The export value for the first 10 months of 2018 expanded by 8.2 per cent, exceeding the Commerce Ministry’s target of 8 per cent for 2018.

On the import side, its value in October 2018 increased 11.2 per cent to $22 billion, resulting in a trade deficit of $280 million. However, Thailand still maintains a trade surplus for the first 10 months of this year, valued at $2.559 billion.

The export growth in October can be attributed to the maturing of Thai exports in various markets, allowing them to continue to expand in value. Japan saw Thai exports grow by 18.7 per cent this month, while India saw 12 per cent growth, and Thai exports to Cambodia, Laos, Myanmar and Vietnam grew by 18.2 per cent. Most importantly, exports to China are now back on track with a positive growth at 3 per cent, Pimchanok explained.

On the downside, she noted that export growths to some other markets showed a slight contraction in October, including to Australia, the Middle East, Latin America and Russia.

Key products driving the October export growth included industrial products, which grew by 6.8 per cent; oil-related products, which grew by 29.1 per cent; and facsimile, telephone and parts, which grew by 33.7 per cent.

The agricultural industry also saw rising exports in October, with 12.2 per cent overall growth, led by various products such as sugar and rice at 77.8 per cent and 28.2 per cent respectively, she said.

Somkid is also pushing for growth in exports to top 7 per cent for the last quarter of this year. His redoubled efforts to spur the economy come after the economy managed to expand just 3.3 per cent in the third quarter.

For the final three months, growth in gross domestic product (GDP) is targeted at 3.5 per cent.

Somkid, after chairing a meeting aimed at speeding up the disbursement of state enterprises’ investment budgets, said that the enterprises have been asked to accelerate their investment as targeted in the last quarter of this year in order to help drive the country’s economic growth above 4 per cent for the whole year.

The third quarter slowdown to 3.3 per cent has seen the economic chief look at ways to ensure growth targets are met.

The economy grew 4.9 per cent year on year in the first quarter of this year and 4.6 per cent in the second quarter.

“The GDP growth of 3.3 per cent in the third quarter came from a contraction of September’s exports by over 5 per cent,” Somkid said.

“But investment and consumption remain good. That quarter’s GDP has been affected as exports contribute about 70 per cent to GDP. We insist that confidence remains.”

For the last quarter of this year, Somkid said programmes for all sectors that play a large role in stimulating the economy will be expedited and state enterprises have been urged to spend without delay.

For October, exports increased 8.7 per cent year on -year, driven mainly by an increase of over 10 per cent in shipments to Japan.

“If Thai export grows 7 per cent and GDP growth rises 3.5 per cent in the fourth quarter, GDP will increase over 4 per cent for the whole of this year,” Somkid said.

Prapas Kong-ied, director-general of the State Enterprise Policy Office (Sepo), said that as a means of helping to drive this year’s economic expansion, 18 state enterprises with large investment budgets have been asked to accelerate disbursement of the funds as targeted, particularly for the fourth quarter of this year.

Prapas attended the meeting chaired by Somkid.

In 2018, some 45 state enterprises regulated by Sepo have a combined investment budget of Bt445 billion. As of October, about 339 billion or 85 per cent of the accumulative investment budget disbursement plans had been disbursed.

Budget for state units

For next year, the combined investment budget has been set at about Bt391 billion, covering enterprises with large investment projects such as State Railway of Thailand, the Mass Rapid Transit Authority of Thailand, the Electricity Generating Authority of Thailand and Provincial Electricity Authority, and PTT Plc.

State enterprises that report financial results in both the calendar and fiscal years are required to consider further front-loading of budget disbursements and to accelerate their investment budget at no less than 95 per cent.

Phacharaphot Nuntramas, senior director of global business development and strategy at Krungthai Bank, said that economic growth is forecast at no more than 4.5 per cent this year after the third quarter’s relatively weak performance, in comparison with the first half. This was due partly to contraction in the agricultural sector as a result of the boost to output from favourable weather in the first six months of year.

Among the positives are that public investment and manufacturing are continuing to expand and exports grew 8.7 per cent in October.

Thailand will likely start to realise impacts from the US-China trade war from the fourth quarter of this year to the first half of next year, Phacharaphot said.

China’s economic slowdown and a depreciation in the yuan should be kept on watch, which could lead to less Thai shipments to China. In October, Thai shipments to China rose only 3 per cent, lower than those to other Asian destinations. The country’s shipments to Japan and Asean increased 18.7 per cent and 21.8 per cent, respectively.

Phacharaphot said that the Bank of Thailand’s Monetary Policy Committee (MPC) is expected to decide to raise the policy rate by 25 basis points in its December meeting after Thai economic figures have not indicated a slowdown.

Mathee Supapongse, deputy governor of the Bank of Thailand, yesterday said that the BOT might revise downward its GDP growth forecast from a current projection of 4.4 per cent.

“GDP growth above 4 per cent would not have any effect on direction of interest rate policy,” he said in response to a question whether slower economic growth would make BOT refrain from a rate hike.

His statement apparently signalled that the central bank might raise the policy rate in the next meeting of MPC next month.

Current beneficiaries of these regimes will continue to enjoy tax benefits until the originally granted incentive period runs out.

The headquarter tax preferential regimes have been a feature of Thai tax law since 2002, as the government has strived to compete with Singapore, Hong Kong and Malaysia for the regional hub status and incentivise multinational companies to locate their headquarters and shared centres in Thailand. This strategy, in combination with the growing economy, improving infrastructure and advancing human capital, has seen some success.

However, decisions on taxation policies and their fiscal impact are no longer strictly a national matter.

Last year, Thailand joined the OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS). BEPS refers to tax avoidance strategies that exploit gaps and mismatches in tax rules to artificially shift profits to low or no-tax locations. Under the Inclusive Framework, over 100 countries and jurisdictions are collaborating to implement measures to tackle BEPS.

In signing up for this inclusive framework, the Thai government has committed to implementing BEPS minimum standards that include combating harmful tax practices. A review conducted last year by the OECD, and later the EU, concluded that the tax preferential regimes of Thailand present opportunities for harmful tax practices and need to be amended, which leads us to where we are now.

Full details of IBC are yet to be released, however, it is expected that the scheme will be designed to address the concerns of, and receive a blessing from, the OECD and EU.

In a nutshell, IBC will continue to offer a number of incentives to multinationals intending to invest or currently holding investments in Thailand, similar to those provided under the previous regimes. This is in line with the government’s aim to continue to promote Thailand as an operating and administrative hub in Asia.

A reduced corporate income tax rate of 8 per cent, 5 per cent or 3 per cent will apply depending on the level of annual expenditure in Thailand, being Bt60 million, Bt300 million and Bt600 million, respectively. Dividends received by IBC from its subsidiaries will be exempt from Thai tax. Exemptions on withholding taxes on dividends or interest paid from IBC will be introduced, as well as exemption from Specific Business Tax on financial management services provided to associated enterprises.

There will be no change to personal income tax for foreign nationals with the reduced flat rate of 15 per cent still applicable. There has been no announcement about when the proposed law will be enacted or when the new scheme will be open to applications.

The next progress report by the OECD is imminent. It is expected to reveal the status of discussions between the OECD and the Thai government on the acceptability of IBC from the BEPS perspective, which may then influence the timeframe for implementation of the legislation.

Contributed by TATIANA BESPALOVA, Tax partner, International Tax Services, KPMG in Thailand

Of the amount, Bt1,100 would go to plantation owners, Bt700 to tappers. The measure, starting in December , would run for five months, according to government spokesman Puttipong Punnakanta.

It followed Prime Minister Prayut Chan-o-cha’s call for urgent relief measures from the Ministry of Agriculture and Cooperatives within a week.

The government aims to provide the financial assistance to 999,065 registered plantation owners and 304,266 registered tappers in a total area of 10,039,672.29 rais. The budget allocated for this measure is Bt18.604 billion.

The Cabinet yesterday also agreed to buy 160,000 tonnes of raw palm oil for Bt18 per kilogramme for electricity production between this month and February next year.

Acting SRT governor Worawut Mala said that these train projects will support travel and transportation among major cities in the East. The four projects include a double-track rail from Sriracha, Map Ta Phut, Rayong, Chanthaburi to Trat; a double-track rail from Khlong 19 to Aranyaprathet; a double-track rail connecting three ports – Laem Chabang, Sattahip and Map Ta Phut – and a double-track rail connecting with Dawei deep sea port.

“The SRT’s target is to develop train projects nationwide, particularly in major cities. There’s only a single-track rail between Sriracha and Map Ta Phut in the East. These will be the first double-track rail lines. We’ve received a budget to study for design and we expect to reach finalisation and open for bids by next year,” Worawut said.

The next project for extension, connecting Map Ta Phut with Rayong, is also under study. The double-track rail for the Sriracha-Map Ta Phut to Rayong-Chantaburi-Trat section, covering 230 kilometres, is expected to commence service in 2025.

The 170-kilometre double-track Khlong 19-Aranyaprathet rail project will likely be proposed for study and design in 2020 and service is expected to commence in 2027.

Design study on the planned 200-kilometre double-track rail project, which will link three ports – Laem Chabang, Sattahip and Map Ta Phut – is expected to start soon, with the route open for service in 2024. A double-track rail project connecting to Dawei deep sea port in Myanmar will be proposed for study in 2020 with service commencing in 2027.

Worawut said the double-track rail development projects would connect major cities for travel and transportation and link with the Eastern Economic Corridor (EEC), enabling the transport of goods to major economic cities and ports for overseas shipments.

According to a source, SRT currently has a double-track rail project in the Chachoengsao-Klong 19-Kaeng Koi 200km section under construction, which is 87 per cent complete. A high-speed train project connecting three airports – Don Mueang, Suvarnabhumi and U-tapao – is expected to see a private-sector player emerging as winner under a public-private partnership scheme to be proposed to the Cabinet in mid-January 2019. The high-speed train extension on the 200km Rayong-Chanthaburi-Trat route is estimated to start service in 2025.

The 70-kilometre Sriracha-Map Ta Phut rail project is expected to require a budget of about Bt8 billion to upgrade the single track to double track, while the Rayong-Chanthaburi-Trat section will be a new route. The Klong 19-Aranyaprathet section will upgrade from single track to double track.