Revenue Department to crack down on big firms

The Revenue Department has intensified its investigation into large firms suspected of tax evasion. Sanit Rangnoi, director-general of the department, said it would step up tax collection from large local and multinational companies.

There are about 2,300 large firms in Thailand with annual sales of more than Bt2 billion.

These firms account for 70 per cent of the total corporate income tax the government should get. The department plans to collect Bt1.2 trillion to finance the 2008 fiscal budget starting this October, with planned government expenditure at Bt1.66 trillion.

It expects to collect Bt397.9 billion in corporate income tax. Sanit conceded that it was a challenge to meet collection targets.

Large firms with huge financial resources and a network of companies try to find loopholes, Sanit said.

The problem has become more serious recently as consulting firms try to woo large firms to set up offshore business units in tax-haven countries, said Satit Rangkasiri, deputy director-general of the Revenue Department.

Consulting firms assure local companies that they could pay less tax if they buy tax-consulting services from them. They offer to arrange documents and offshore banking for Thai exporters.

For example, if a Thai firm which exports products to the United States sets up an offshore business in a tax-haven country it could transfer profits to offshore units and avoid paying taxes. In practice, the goods are shipped directly to the destination at a lower price, but the document states that they were first exported to the offshore unit before being re-exported to the destination at a higher price.

Satit said this might be legal in the tax haven but was illegal in Thailand. Satit said there were many tricks employed by large firms to avoid tax.

He said he would investigate both the consulting firms and their clients.

Critics say Thailand's30-per-cent corporate tax, compared with 20-25 per cent in other countries in the region, only encourages avoidance.

Wichit Chaitrong

The Nation