Tax differences need to sorted out

Siripong Supakijjanusorn, a partner of PricewaterhouseCoopers, a legal and consulting firm, said yesterday that Abhisit and Finance Minister Korn Chatikavanij should solve tax, or net-off, issues related to foreign investment.

The problems arise when foreign investors have more than two projects getting tax incentives from the BOI, Siripong said. For instance, he said, if one of the projects loses about Bt50 million and the other project gains Bt20 million in profits then, according to the BOI, the profitable project would get a tax exemption and the loss-making entity would not have to pay tax for at least five years.

However, according to the Revenue Department, the company would have to make net-off first and then only Bt30 million of its losses would be carried forward. And if the firm makes a profit on a non-BOI project of Bt50 million, then it will have to pay corporate income tax on Bt20 million.

"There is a big difference between paying tax and not paying tax," Siripong said.

Facing a similar issue, Minibea-Group of Companies (Thailand), a manufacturer of electronic and mechanical components, recently filed a lawsuit with the Tax Court after the Revenue Department required it to pay taxes but the BOI ruled in favour of the firm.

Siripong said several investors faced similar problems and this just caused confusion among foreign investors.

"The Revenue Department should not pass the buck to the Tax Court, because the state judicial council agrees with BOI's interpretation of the law," he suggested.

He noted that the special BOI law, designed to promote FDI, should override the general tax law in cases where problems occur with different legal interpretation. He also said the government should clarify that it wants more FDI rather than just collecting taxes from foreign investors because investments generate jobs.

He said if these problems were not sorted out soon, investors might opt for other countries such as Malaysia and Singapore, which offer better tax incentives. As most import duty rates within Asean countries will be dropping to 0 per cent next year, Thailand will have no export tariff barriers.

Meanwhile, Thavorn Rujivanarom, lead partner of PricewaterhouseCoopers, expressed concern about tax law that does not facilitate the repatriation of profits of investment made overseas by Thai firms. At present, all Thai firms have to pay tax on offshore profits if tax in the host country is less than 15 per cent. The restriction is encouraging Thai firms to either park their profits or reinvest in offshore projects, instead of bringing the income home, he noted.

He also complained that Thailand was moving too slowly in reforming taxes to facilitate FDI or allowing Thai firms to invest overseas. According to the "Doing Business 2010" World Bank survey, Thailand ranked 88 instead of last year's 82 place in terms of easy taxes. Singapore ranked 5th and Malaysia 24.