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January 21, 2009

Thailand: Tax-relief package to boost economy
Thailand approved a 40 billion baht ($1.1 billion) tax relief package on Tuesday as part of measures to boost the economy in the face of the global financial crisis, reported Reuters.

The tax package included a new tax allowance of up to 300,000 baht for people who buy a new home this year, the extension of a tax allowance of up to 100,000 baht a year for mortgage interest payments and property tax breaks for companies, the Finance Ministry said in a statement.

The tax breaks in the property sector would cost the government about 36.5 billion baht in lost revenue, the ministry said.

Small and medium-sized businesses in all sectors with income of less than 1 million baht will be exempt from taxes, a threshold raised from 60,000 baht previously.

The tax measures -- part of a planned 300 billion baht stimulus package -- came a week after the government extended financial assistance and other relief measures for low-income workers and state employees suffering economic hardship.

The cabinet also agreed a plan on Tuesday to help farmers by buying up rubber, corn and palm oil to support prices. It put the cost of this at 13 billion baht.

It is already intervening to prop up domestic rice prices.

It has also approved a 115 billion baht supplementary budget to boost spending to help the economy, expected to grow at the lowest rate in a decade this year, with consumer confidence hovering near a seven-year low.

Last week's relief measure called for the government to spend nearly 19 billion baht on a one-off, 2,000 baht cash handout for some 8 million workers in the private sector and 1.47 million junior state employees.

Small and medium-sized private businesses would also be offered soft loans for up to five years in return for an agreement to refrain from laying off workers.

The new government, in power for just over a month, has extended various other measures brought in by the previous administration, such as free water and electricity for the poor and subsidised public transport, with minor changes to detail.

However, it has removed subsidies on retail petrol prices now that crude prices have dropped.

Finance Minister Korn Chatikavanij said last week the stimulus measures would help boost economic growth to 2 percent this year, the lowest since 2001, when the economy grew 2.1 percent, and down from an estimated 4 percent in 2008.

The Bank of Thailand has cut its policy rate aggressively by a combined 175 basis points to 2.0 percent in the past two months to help the export-led economy amid a global slowdown. It has said its monetary policy will remain accommodative.

Central bank Chief Economist Amara Sriphayak said last week unemployment could rise to 1 million this year, or 2.8 percent of the workforce, if the economy did not grow at all.

Governments around the globe have launched massive economic stimulus measures in recent months in a bid to stave off recession.

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