Finance Ministry to propose tax overhaul to new government, raise VAT to 8.5%

Thailand’s economy is projected to expand by approximately 2 percent in 2026, according to Lavaron Sangsnit, (ลวรณ แสงสนิท) Permanent Secretary of the Ministry of Finance, although several risks remain that require close monitoring. Key concerns include exchange-rate volatility and potential delays in the preparation of the 2027 fiscal budget following the dissolution of the House of Representatives.

The dissolution has resulted in a caretaker government, limiting the implementation of several planned economic measures. As a result, the first quarter of 2026 is considered a challenging period for economic management. Despite these constraints, certain factors are expected to provide short-term support to the economy, particularly election-related activities, which may help stimulate spending and confidence.

Looking ahead, the Ministry of Finance is preparing a comprehensive tax-structure reform plan as part of a broader strategy to strengthen Thailand’s fiscal sustainability. The proposal is intended to be submitted to the incoming government once it takes office, with the objective of enhancing long-term revenue generation and maintaining fiscal discipline.

In parallel, the ministry is continuing to advance its Data Lake initiative, a large-scale data integration platform that links information from multiple government agencies, including the three tax-collecting departments. The project is designed to support the development of the Ari Score, a government-backed alternative credit assessment system aimed at improving access to formal financing for small borrowers and addressing informal household debt.

The Ari Score is expected to leverage existing public-sector databases to expand credit opportunities for individuals with limited financial histories, thereby reducing reliance on informal lenders and improving financial inclusion.

During the dissolution period and the election process, the Ministry of Finance is accelerating the finalisation of its Medium-Term Fiscal Framework for 2027–2030, along with the broader tax-reform package, to ensure readiness for submission to the next administration.

As part of the proposed reforms, the ministry plans to recommend a gradual increase in the value-added tax in line with the medium-term fiscal plan. The proposal includes a phased rise from the current rate of 7 percent to 8.5 percent, with a further increase to 10 percent by 2030.

To mitigate the impact on vulnerable groups, accompanying support measures have been prepared. A portion of additional VAT revenue would be allocated to the state welfare card programme, while remaining funds would be used to help reduce living costs in other areas. Such mechanisms are intended to ensure economic resilience while safeguarding low-income households amid fiscal reforms.