The Thai government is imposing an inheritance tax as a means to reduce economic inequalities in the country. Opponents believe that an inheritance tax will destroy incentives to save and invest. In addition, they point out that assets have already been taxed once and death should not be a taxable event.
What is the new law of succession?
The inheritance tax proposal would impose a 10% tax on the value of an estate of more than 50 million baht. Equity will be calculated on properties that have records such as real estate, vehicles, stocks, bonds, and bank deposits. Properties without official records, such as artwork, jewelry, and antiques, are not taxable because they can be easily transferred and are difficult to locate.
The heirs of the property can pay the tax in installments of 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 under consideration by the Cabinet. 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 passing the inheritance tax?
While the 10% is relatively small compared to other nations that have an inheritance tax or inheritance tax, it is expected that many people who can be taxed will look for ways to place their assets outside the reach of the government. This can be in the form of converting your recorded assets to unrecorded assets such as jewelry, art, and antiques.
An inheritance tax could also cause capital outflows out of Thailand, as the wealthy send their finances abroad. This will lead to a reduction of the capital to invest in Thailand. Without private equity in banks, there will be fewer funds available for business loans. In addition, 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 country’s needs. However, most people will not be willing to give up their assets.
It will still be seen how much funds will be raised through the inheritance tax. A negative effect of the flow of money out of the country will reduce private investment in the country, which can cost more than any income earned.