Negative Income Tax: Starting in 70, everyone had to file taxes. Low income people received welfare benefits.

Thailand is preparing to implement a "Negative Income Tax" in 2570, requiring all Thais to file taxes even if their income falls below a certain threshold, to provide the government with income data. High-income earners will pay taxes as usual, while low-income earners will receive welfare benefits.

What is Negative Income Tax?

Negative Income Tax, or negative income tax, requires all citizens to file income tax returns with the Revenue Department, even if their income does not meet the taxable threshold. This allows for accurate information on actual income and the allocation of welfare benefits. The principle of Negative Income Tax is as follows:

1. 1. Those with incomes above the threshold must pay taxes to the government as usual.
   2. Those whose income falls below the threshold will not pay taxes and will instead receive a government transfer. The amount received will be determined by the difference between their actual income level and the set income threshold.

The Ministry of Finance aims to begin using negative income tax in Thailand in 2570.

Why use negative income tax?

Each year, the government spends more than 1 trillion baht on social welfare, representing at least 5% of GDP. However, the allocation of each welfare program remains fragmented and does not link income and welfare data to citizens. This leads to redundancy and a higher budget than expected.

Therefore, a negative income tax is a tax structure reform that prioritizes income distribution and reduces inequality by focusing on providing targeted assistance to low-income earners who are eligible for welfare benefits, thus saving budgets.

It also helps bring more people into the tax system because low-income earners have an incentive to file taxes to receive financial assistance, while once their income reaches the taxable threshold, taxes can be collected immediately because they are already in the tax base.

3 things to consider if Thailand is to implement a negative income tax

According to the National Economic and Social Development Council (NESDB)'s report on the state of Thailand's social situation for the third quarter of 3, although the implementation of a negative income tax will benefit both the public and the government, there are still issues that need to be considered, including:

1. 1. Clearly define the objectives and target groups to be assisted based on the context of Thailand.
   2. Setting appropriate income criteria and assistance levels requires research to determine income criteria that can motivate people to work to increase their income. The criteria must also be reviewed periodically to ensure they are in line with the cost of living.
   3. Budgeting to support NIT operations and to study the impact on people's quality of life and fiscal burdens, such as considering the elimination of some redundant welfare measures and consolidating assistance into a single system, along with attracting those with incomes above the threshold into the tax system, along with establishing and enforcing strict penalties to prevent moral hazard.

Negative Income Tax Abroad

Singapore uses the Workfare Income Supplement (WIS), which aims to help low-income earners and reduce income inequality in the country, as well as encourage retirement savings. A portion of the WIS is contributed to the Provident Fund.

The United States uses the Earned Income Tax Credit (EITC) to help low-income, employed people ages 25 to 65 who have a valid Social Security number. The assistance is given based on the burden of caring for household members, such as having children, the number of children, etc.

South Korea uses the EITC based on both the presence and number of children, as well as the household's source of income (single/dual), and also covers older people and the self-employed, who benefit to varying degrees.

Australia has implemented a Family Tax Benefit (FTB) scheme to help low-income households raise children, with levels of support categorized by the number of children, their ages and household characteristics (complete household/single parent).

Source: Ministry of Finance, National Economic and Social Development Council (NESDC)

Read related news

• The Treasury Department is pushing forward with the Negative Income Tax, which will begin in 2570.