Officials may cut taxes to jolt economy

Policymakers will meet today to debate new tax cuts and stimulus measures to help boost economic growth. Finance Minister Chalongphob Sussangkarn is scheduled to meet with several ministry working groups that have been reviewing ways to accelerate fiscal spending to help increase consumption and investment.

The proposals include a call to temporarily cut special business taxes and transfer taxes for property transactions. Special business taxes will be cut to 0.1% from 3.3%, with transfer taxes reduced to 0.01% from 2% _ reductions that mirror tax cuts implemented after the 1997 crisis to boost the property market.

Finance Ministry officials privately agree that the measures are unlikely to have a significant impact on the property market, as transactions have fallen in recent months due to weak sentiment and consumer confidence rather than concerns over prices.

''But at the least, it will be a positive sign for the economy, which to date has been hit only with negative news,'' one official said.

More tangible will be a revival of state development programmes for low-income rural communities.

A number of development programmes initiated under the Thaksin Shinawatra government were cut back following the Sept 19 coup after his critics labelled them populist and said they undermined financial discipline among rural households.

Authorities now are considering reviving several spending programmes to help directly inject state funds into rural communities as a rapid and relatively efficient means of spurring consumption.

State development banks such as the Government Savings Bank and the Bank for Agriculture and Agricultural Co-operatives will also be urged to review their lending plans upwards after several bank leaders indicated that lending growth would fall this year due to the weak economy and growing concerns over asset quality.

Dr Chalongphob recently told state bank executives that they should focus on lending growth, albeit while maintaining prudent credit standards to minimise potential non-performing loans.

State enterprises and government agencies will also be directed to accelerate budget disbursements and new investments to meet an overall disbursement target of 93% for the fiscal year ending in September.

Meeting the investment target however would require spending of up to 180 billion baht per month for the six months remaining in fiscal 2007, an unlikely task given that state spending programmes have stalled because of bureaucratic fear of an expanding corruption investigation into the actions of state officials by the Asset Scrutiny Committee.

The 2007 fiscal budget calls for expenditures of 1.56 trillion baht, with state enterprises budgeting another 400 billion in investments this year.

The Finance Ministry currently forecasts economic growth this year at 4% to 4.5%, although most private economists say growth is likely to be lower due to political and economic uncertainties.

According to the Bank of Thailand, a number of companies in the electrical appliance, auto, textiles and construction sectors have already begun cutting back production due to weak demand.

Production of televisions, for instance, fell 8.8% in February from the year before, the fourth straight month of declines, while production of electric fans dropped 11.2% in February from the year before.

Production of other kitchen appliances, including refrigerators and rice cookers, registered similar declines, although the output of air-conditioners and washing machines increased in the first two months of the year compared with the same period last year.

From : BKK Post
By : PLA
Date : Apr 3, 2007

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