TAX INCENTIVES RELATING TO DONATIONS OF MONEY AND ASSETS FOR LOCAL ADMINISTRATION ORGANIZATIONS

Abstract

Incomes collected by local administrative organizations (LAOs) showing local wealth status are considered as locally taxable. Most local taxes are collected based on asset value or wealth tax which the government has authorized LAOs to collect. As a result, LAOs are able to collect local taxes autonomously; all incomes collectable from local taxes belong to LAOs without being remitted to a government treasury account. Current legislation authorizing LAOs to collect local taxes is the Land and Building Tax Act B.E. 2562 (2019), which came into effect on 1 January 2020. As the law proved controversial, the government decided to postpone enforcement of land and building tax collection until 31 August 2020.

Additionally, on 10 June 2020, the government announced Royal Decree Deductions on Land and Building Tax B.E. 2563 (2020) as a reaction to the Coronavirus disease 2019 (COVID-19) pandemic internationally and in Thailand. Due to COVID-19, the global and Thai economies shrank rapidly and significantly, affecting many people. The reduction tends to create economic suitability and to relieve the pandemic’s overall effects. As a result of the announcement of this regime, LAOs will lose approximately thirty nine billion baht.

Current studies found that the ratio of collectable local taxes of LAOs is less than overall incomes of LAOs. So 90% of overall income are generated from government budgets and other Department of Local Administration subsidies and the Ministry of the Interior. Although the constitution prescribes that LAOs should be able to collect income by themselves, current related laws in on LAO tax collection do not sufficiently facilitate their doing so.

Japan provides another example, stressing local fiscal independence insofar as local government organization in Japan have the ability to perform many important tasks due to relatively high fiscal independence. This results from provisions in the 1947 Japanese Constitution about local government organization in Japan, guaranteeing that the “local administration of Japan must be in accordance with the guarantee of local independence. And freedom to manage and manage their own assets.” In addition, local government in Japan may provide diverse and effective public services of this kind because local government organizations in Japan draw from six income sources: local tax, local allocation taxes, local transfer taxes, government subsidies, local public bonds and other income.

In 2008, the Japanese government promulgated a law allowing donors of money to local government organizations to receive two benefits, which may be deducted from income and housing taxes to obtain product rewards from different local areas as part of a hometown tax policy (furusato nozei). Like Japan, The United States of America also has laws allowing individuals or private companies to donate to organizations or government agencies. These donations are tax deductible. These findings suggest that if a hometown tax policy or crowd funding were to be implemented in Thailand, revenue for local government organizations should increase and income would be better distributed to the community in innovative ways.