The Thai government is imposing an inheritance tax as a means of reducing economic inequalities in the country. Opponents believe an inheritance tax will destroy incentives to save and invest. In addition, they point out that the assets have already been taxed once and death should not be a taxable event.
What is the new inheritance law?
The Inheritance Tax proposal would impose a 10% tax on the value of an estate of more than 50 million baht. The estate will be calculated on properties that have records such as real estate, vehicles, shares, bonds and bank deposits. Property without official records, such as art, jewelry, and antiques, is not subject to tax because it can be easily transferred and is difficult to locate.
The heirs of the property can pay the tax in installments over two to three years. To prevent tax evasion, the revenue department has proposed a 5% gift tax against families who have assets and wealth worth 10 million baht or more.
The bill is currently in Cabinet for consideration. Once approved by the Cabinet, the bill will be sent to the National Legislative Assembly for voting and promulgation. It is expected to become law in about six months.
What is the economic effect of the approval of the inheritance tax?
While 10% is relatively small compared to other nations that have an estate tax or inheritance tax, it is expected that many people who can pay taxes will look for ways to place their assets out of the hands of the government. This can be by converting your registered assets into unregistered assets such as jewelry, art, and antiques.
An inheritance tax could also lead to capital outflows out of Thailand, as the wealthy send their finances abroad. This will lead to capital reduction for investment in Thailand. Without private capital in the banks, there will be fewer funds available for business loans. Also, the wealthy can try to invest their funds and grow a business abroad without repatriating their funds. Thailand is still a developing country and requires investment income.
The inheritance tax is intended to reduce wealth inequality in Thailand while increasing income with limited impact on low-income people. The increased revenue will be used for government programs to finance the needs of the country. However, most people are usually unwilling to give up their assets.
It will still be seen how much funds will be raised through inheritance tax. A negative effect of money flowing out of the country will reduce private investment in the country, which can cost more than any revenue collected.