Officials inch towards negative income tax

The Finance Ministry is preparing a comprehensive overhaul of the government's welfare system, laying the groundwork to implement a negative income tax (NIT) system in Thailand.

According to finance permanent secretary Lavaron Sangsnit, within two years or less the welfare system will be transformed into an NIT system.

Under this approach, individuals whose income falls below the threshold for paying income tax would receive various forms of government assistance.

Anyone wishing to receive welfare benefits would be required to file a tax return with the Revenue Department.

However, before the NIT can be implemented in Thailand, he said the government must successfully establish three components: a comprehensive data system, an eligibility screening system for welfare recipients, and the technological infrastructure capable of supporting the programme.

Under the NIT system, welfare benefits would no longer be the same for everyone.

Assistance would be tailored to each individual's level of hardship and needs, ensuring each person receives the type of support most appropriate to their circumstances, said Mr Lavaron.

"The current revision of the state welfare card eligibility criteria marks the starting point for preparing to implement NIT within 1-2 years," he said.

All government welfare programmes are being reviewed to reduce duplication, said Mr Lavaron.

The Comptroller-General's Department is compiling information on how each individual receives welfare benefits. For example, a person may currently receive an elderly allowance, a disability allowance and additional benefits through the state welfare card simultaneously.

He said government welfare spending will become more efficient, transparent and individualised, with benefits designed specifically for each recipient.

"There is considerable overlap currently, and it is unclear how many benefits a person receives. In the future, eligibility entitlements will be clarified," said Mr Lavaron.

"A person may receive multiple benefits, but they must be appropriate to that individual's circumstances. It will be a tailor-made system."

Regarding the review of state welfare card eligibility criteria, current cardholders are required to give consent for authorities to verify their information starting on July 17.

The revised criteria are intended to better identify individuals who are genuinely poor and lack family support.

PARENTAL SUPPORT

One new criterion defines a child claiming a tax deduction for supporting his or her parents as the parents having family support. As a result, parents who previously qualified for state welfare cards may lose their eligibility.

Mr Lavaron said the tax deduction, which allows a child to claim a deduction of 30,000 baht per year for each parent, means that on average the child is providing financial support of 2,500 baht per month to the father and another 2,500 baht per month to the mother. This amount is higher than the 300 baht per month provided by the government through the welfare card programme.

However, if a child claims the parental support tax deduction without actually providing financial support, the deduction should not be claimed, and doing so would constitute tax fraud, he said.

Parents who lose their state welfare card eligibility because their children have claimed the parental support deduction may appeal to have their benefits restored. Appeals can be filed between July 18-31.

Cases of parents losing welfare eligibility because of a child's tax deduction claim should be rare, said Mr Lavaron.

"The current debate should focus on the principle of whether the policy is appropriate, not how many people are excluded from the welfare card programme," he said.

"The debate should concern whether the underlying principles are right or wrong, not whether a large or small number of people are removed from the welfare card programme."

State welfare cardholders should be the lowest-income segment of society, noted Mr Lavaron.

"This is the starting point for reorganising the welfare system -- providing welfare that is appropriate for each group of people," he said.