Thai Government Tariff Compensation Package
Thailand bolsters Business Support Amidst Tax Changes and Trade Challenges
Thailand’s government is implementing a multi-pronged strategy to support businesses navigating a shift to a 19% tax rate and contending with evolving global trade dynamics, particularly increased US import tariffs. The plan encompasses financial measures, tax adjustments, and proactive trade negotiations, aiming to transform adaptation into a competitive opportunity.
Boosting Lending Capacity of State Banks
A key component of the government’s support involves freeing up capital within state-owned financial institutions. By repaying 20 billion baht in loans to the Small and Medium Enterprise Growth Bank of Thailand (SME Bank) and other state banks, the government anticipates increasing their collective lending capacity by up to 100 billion baht – a five-fold increase. This influx of funds will be crucial for providing businesses with access to capital during the transition period.
The Bank of Thailand (BOT) has advised continued monitoring of the remaining 24 billion baht from the 2025 economic stimulus budget, emphasizing the need for openness and public accountability in its allocation. thes funds are earmarked for projects designed to mitigate the economic impact of geopolitical events, like ongoing conflicts, and foster long-term economic resilience. Alongside this, the government is considering stricter enforcement of import regulations, thorough product standard inspections, and resolution of trade disputes to address the increasing influx of foreign products.
tax Measures for a Smooth Transition
Recognizing the potential impact of the tax rate change, the Ministry of Finance is actively reviewing a suite of tax measures to ease the burden on businesses. These include potential tax reductions, corporate income tax cuts, and targeted tax credits. The details of these measures are expected to be finalized shortly.
Competitiveness Enhancement Fund Expands support
The recently approved 10-billion-baht Competitiveness Enhancement Fund is being broadened to include businesses currently ineligible for Board of Investment (BOI) incentives, particularly those affected by US tariffs. This expansion acknowledges that the impact of trade challenges extends beyond companies traditionally benefiting from BOI support.
Pichai, a government spokesperson, emphasized the long-term vision of transitioning Thailand from a conventional manufacturing base to a more modern, innovative economy. The fund will provide targeted support to industries most impacted by these changes,recognizing that a “one-size-fits-all” approach is insufficient. The goal is to ensure Thai businesses remain competitive, particularly in export markets where rising costs could otherwise prove detrimental.
Tailored support for Diverse Business Needs
Government officials are engaging in ongoing dialog with business operators to understand their specific needs. Pongsarun Assawachaisophon,Deputy Secretary-General to the Prime Minister,highlighted the varying challenges faced by different sectors.
The jewelry and gem export industry, for example, is grappling with increased US import tariffs.Initial proposals suggest importers may absorb 40% of the tariff, with the government possibly covering another 40%, and the remaining 20% being passed on to US consumers or absorbed by US importers. This sector has requested a 1-2 year adjustment period, favoring tax reductions over soft loans, with the government exploring mechanisms for tax recovery during this timeframe.
Proactive Trade negotiations and Domestic Market Protection
Beyond financial and tax measures, the government is actively pursuing trade agreements. Negotiations are underway for a Joint Trade Agreement with the US covering over 10,000 items, including agricultural products.
To protect domestic agricultural producers, the government is committed to prioritizing local produce.For crops like corn, the government will purchase all domestically grown supplies before considering imports, establishing a market price to ensure local farmers benefit. This strategy aims to stabilize the agricultural sector and safeguard the livelihoods of Thai farmers.