Bangkok, Thailand – Thailand has abandoned plans to double its value-added tax (VAT) rate following a proposal that faced significant backlash from both the opposition and a key member of the ruling coalition.

The original proposal sought to increase the VAT from 7% to 15%, a move that was met with concerns about its potential impact on consumers, particularly amid a slowing economy. Prime Minister Paetongtarn Shinawatra ultimately decided to scrap the proposal after discussions with Finance Minister Pichai Chunhavajira and her policy advisory board.

While the government is committed to addressing income inequality and boosting public investment, officials acknowledged the need for a more comprehensive review of the tax system. Prime Minister Shinawatra noted that such reviews can be time-consuming, with some countries taking up to a decade to implement significant tax reforms.

The decision to maintain the current VAT rate aligns with the government’s focus on policies aimed at reducing the cost of living, creating new revenue streams, and improving public sector efficiency. Thailand has held its VAT rate at 7% for 26 years, making it one of the lowest in the region.

Regional Context

In contrast to Thailand’s decision, Indonesia plans to raise its VAT rate to 12% from 11% starting next year. However, the Indonesian government has indicated that the increase will be selective, with certain essential goods and services being exempt.

Vietnam, another Southeast Asian nation, has extended its temporary reduction in VAT from 10% to 8% until June 2025. This move is aimed at supporting economic recovery and mitigating the impact of rising inflation.