National —
On December 6th, 2024, Mr. Sorathep Rojpotjanaruch, the Thai Restaurant Business Association Chairman, raised concerns about the government’s proposal to increase the VAT rate from 7% to 15%.
He warned that the move could devastate the restaurant industry, which has already seen over 50% of businesses shut down since early 2024.
The VAT hike would disproportionately impact restaurants, as they must pay VAT on food sales but cannot deduct VAT on raw materials like fresh produce. This unique burden forces businesses to choose between shutting down or raising prices.
Sorathep estimated that food prices could surge by 20-25% to cover the increased costs, burdening consumers.
He urged the government to reconsider and suggested alternatives, including raising the VAT registration threshold from 1.8 million to 2.5 million baht and allowing a 25% tax deduction for agricultural raw materials, which are currently non-deductible. These measures, he said, could help SMEs remain in the system and avoid mass closures.
Additionally, Sorathep criticized comparisons to countries like those in Europe, where VAT rates exceed 20%. He argued that such comparisons are flawed, as higher living costs in those countries are offset by higher incomes. In contrast, Thailand’s proposed VAT increase is not matched by wage growth, leaving businesses and consumers to bear the brunt.
He warned that without appropriate adjustments, the policy would push more businesses out of the tax system, reducing government revenue instead of increasing it, and would accelerate closures among SME restaurants struggling to survive.
Meanwhile, Mr. Thienprasit Chaiyapatranun, the Thai Hotels Association president (THA), warned that raising VAT from 7% to 15% would harm hotels by discouraging spending and increasing costs. Fixed-rate room packages, which include VAT, would force businesses to absorb higher costs if rates remain unchanged.
He urged a gradual increase to 10% instead, citing a fragile economic recovery and cautious consumer spending. Thienprasit also stressed the need for immediate government measures to boost spending ahead of the New Year.
He suggested the VAT hike proposal might be a test of public opinion and called for clear explanations on its benefits and impact.
This article originally appeared on our sister website The Pattaya News.
