Revenue department versus board of investment: the challenges of the tax incentive system and FDI promotion in Thailand

Abstract

This thesis examines the use of tax incentives to promote foreign direct investment (FDI) in Thailand and the issues arising out of the way in which the Thai revenue system has chosen to implement these incentives. Thailand experiences sporadic political unrest, and has been affected by regional and global economic crises. Since FDI appears to increase economic growth and help the host country to achieve sustainable development, the Thai government has a clear policy to encourage FDI. Tax incentives have become a significant weapon in the Thai government’s arsenal for encouraging this aim. This thesis presents a detailed analysis of the tax incentives and the mechanisms used for their implantation. Analysis reveals that, unfortunately, the Thai government has also chosen to deliver the administration of tax incentives in to the hands of two separate bodies ─ the Revenue Department and the Board of Investment (BOI). This strategy is problematic because it creates unnecessary difficulties and uncertainty in the administration of incentives and promotes confusion among foreign investors. The jurisdictional problems inherent in the system of the dual allocation of tax incentive powers are highlighted in the landmark Minebea case, which involved conflicting interpretations by the Revenue Department and the BOI. In addressing these jurisdictional problems, this thesis examines norm conflict resolution principles in general and the lex specialis in particular, and argues that the Investment Promotion Act of 2001 (IPA 2001), being a special law, and so overrides the more general provisions of the Revenue Code. Two solutions are suggested in order to tackle the current problem: 1) to amend the IPA 2001 to specify methods of tax calculation and clearly define problematic terms and 2) to incorporate the tax incentive provisions provided for BOI-promoted companies into the Revenue Code. This is based on the premise that all tax matters, including tax incentives provisions, should be administered only by the revenue authority, i.e. the Revenue Department.