Belastingen

[Ben]

LAWALLIANCE LIMITED

Headlines in the newspapers last week may make some worry that Thailand will implement an estate tax as proposed by the Finance Ministry. The tax has received a fair level of support from government offices and tax court judges, and could be set at 70% for a billionaire.


The main reason for the estate tax appears to be because the budget is facing a deficit and the government needs to find more revenue to fund its expenditures.


In addition, the government may want to redistribute the nation's wealth to the poorer classes.


But how many countries really use the estate tax as a tool to reduce the gap between the rich and the poor? And how many are successful in doing so?


As the law provides for tax exemptions on various transactions, it is interesting to see how an estate tax might affect them. For example, the transfer of immovable property to children is exempted from personal income tax. A gift from a parent could be viewed as income made under a moral obligation or in a ceremony or occasion in accordance with an established custom, which is also exempted.


While no limits exist on what is tax-free in the case of immovable property, the latter is somewhat tied to moral obligation and established custom to determine if such a gift should be taxable.


In addition, the courts have consistently ruled that if an individual is willing to sell an asset, such as shares at a price lower than a fair market value, he or she is not subject to a tax assessment. The buyer will not be viewed as receiving income, as long as such a sale is not simply disguised compensation for services.


Although those provisions reflect a transaction before the death of a parent, they can easily be used to avoid the estate tax. Instead of passing on a family's riches at death, the parent can do so while still alive to avoid the tax burden.


This takes only 15 minutes for a tax expert to figure out. So, it is unavoidable that the implementation of the estate tax will require a host of amendments throughout the Revenue Code to close out such loopholes.


Thailand is a society in which families are very close, and children are supposed to take care of their parents after retirement. Adopting progressive tax rates similar to personal income taxes could trigger social upheaval. In fact, countries that collect inheritance tax often end up with a low tax rate _ perhaps only two or three tax brackets.


In the end, the estate tax will act more like a transfer tax rather than a direct tax as proposed initially. This makes it almost impossible to achieve the distribution of wealth, and the government can only make a few bucks off a family's tragedy. This will not be a popular measure while Thailand is undergoing a social crisis.


I'm just wondering if the idea to collect an estate tax has come out to share the new finance minister's vision before the reshuffle season, or to distract public attention from the involvement of some senior officers in the family affairs of the former prime minister.


In any case, if the government really wants to see successful distribution of wealth through tax reforms, it can simply focus on the existing tax regime and create more equity by eliminating unfair measures.


Wouldn't this be simpler?