Because local administrations have a responsibility to provide basic public services, they need to raise revenue to support these activities. The primary sources of local administration’s revenue are local levied taxes, surcharges on government tax, shared revenue, revenue transfers, and government grants.
Local Levied Taxes
Local levied tax is the revenue directly administrated and collected by the local administration directly. This source of local revenue can be classified into two groups namely:
1. Local levied taxes imposed by the Municipality (Tessaban), Tambon Administrative Organizations (TAOs), Bangkok Metropolitan Administration (BMA) and Pattaya City
• House and Rent Tax
This tax is collected from an owner who lets buildings, other constructions, and land or uses such for industrial or commercial purposes. The 12.5 percent tax rate is levied on the annual value, which is calculated as the sum of the reasonably expected price of the property to be let in one year.
• Land Development Tax
This tax is collected from owners of land or persons in possession of land (vacant land not owned by another). Tax rates ranging between 0.25 – 0.50 percent of official land valuation are applied. However, there are exemptions for land used for residence, farming, or cultivation purposes. Exemptions dependant upon current local administration’s regulations.
• Signboard Tax
This tax is annually collected from owners of signs or billboards displaying words, trademarks, and/or products in any form displayed on any material for the purpose of advertising. Tax rate depends on the language used on the signboard. The use of Thai language, is 3 baht per 500 sq.cm and foreign language is 40 baht per 500 sq.cm of signboard. Furthermore, the minimum tax liability is 200 baht in all cases.
• Slaughter Tax
Slaughter tax is levied on a butcher who slaughters cattle, goat, sheep, pig, chicken, ducks, or geese. Tax rate is between 10-30 baht per animal.
• Fee, Fine and License
e.g. garbage collection fee, construction permission fee, etc.
2. Local levies collected by Provincial Administrative Organizations (PAOs)
• Hotel Tax
A PAO can impose a tax on hotel guests of up to 3 percent of the room fare.
• Petrol Stations Tax
A PAO can impose petrol station tax on retail fuel including gasoline, diesel oil, and petroleum gas. Tax rate is up to 0.05 baht per litre of fuel.
• Retail Tobacco Tax
This tax is imposed on retail shops that sell tobacco. The tax rate is up to 0.05 baht per cigarette.
Surcharge on Government Tax
This surcharge tax is an additional 10 percent on top of tax levied by the government less 5 percent of this total surcharge tax for collection expenditure. The surcharge tax is added on:
• Value Added Ta x added 11.11 %
• Specific Business Tax added 10 %
• Liquor Tax added 10 %
• Excise Tax added 10%
• Retail Liquor License and Gambling License added 10 %
• Gambling Tax on Horse Racing added 2.5 %
Shared Revenue
This type of revenue is the revenue collected by the government and shared with the local administration, which includes:
• A five percent share of VAT collected in every province except Bangkok which is then transferred to a PAO in that province;
• 60 percent of mineral and petroleum tax distributed by the source of revenue ; and
• VAT additionally transferred to all local administrations according to the Decentralization Act.
Revenue Transfer
This revenue is collected by government agencies and transferred to local administrations and includes:
• Motor Vehicle Tax and fees collected from provincially registered motor vehicles, which are then transferred to the respective local administrations.
• Real estate registration fee distributed by the source of revenue.
Grant
This source of local revenue can be divided into two groups, namely:
1. General grants or unconditional grants; These kinds of grants are given to local administrations.
2. Project or matching grant; This kind of grant is given to local administrations with the
proviso that they spend the grant on a certain activity or specific project or, with a requirement to acquire cofinancing from local government.
Other Sources of Revenue
• Revenue from fees, fines, and user charges such as garbage fees, construction permit fees and those from social services, e.g. water works, pawnshops etc.
• Revenue from local administration assets e.g. accrued interest from saving accounts, and asset rental income etc.
• Loan Local administrations can raise revenue by borrowing from saving funds, banks or by issuing bonds.
• Accumulated Fund This revenue occurs when local administration practices
budgetary surplus.
Decentralization Plan
When the present constitution was effected in 1997, it created a major change in the decentralization process as it introduced the principle of local autonomy and therefore required the government to draft the Decentralization Act and establish a National Decentralization Committee (NDC). The NDC was responsible for drawing up an action plan to determine how decentralization would proceed. Furthermore, the NDC outlined the power, authority, and duties that would be granted to local administrations and further, what responsibilities would be transferred to them from the government. According to the Decentralization Act, aggregate local administration revenue must not be less than 20 percent of the total government’s net revenue in fiscal year 2001, increasing and not to be less than 35 percent of the government’s net revenue by fiscal year 2006.
Source: Tax Policy Division, Fiscal Policy Office, Ministry
of Finance, Thailand.
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