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Inheritance Tax Woes

By on Sep 29, 2014 in Property News

It should come as no surprise that the recent headlines about a new inheritance and gift tax has caused some wealthy families to give serious thought to their estate planning.

News-bkkpost_22sep

Vichai Tongtaeng Lawyer and veteran investor

Take the case of Cindy, a 46-year-old spa business owner. After hearing news about the new tax, her parents’ first response was to talk with their family lawyer and begin separating their assets among their three children.

“I suppose the law is forcing people to think about things that they don’t really like to think about,” she says.

Like most people, the thought of additional taxes does not exactly fill Cindy with joy.

“It’s basically double taxation. Our assets, whether it’s money or property, is already taxed by the government. I just think the idea of this new tax is unfair,” she says.

“I wasn’t born rich, neither was my family. But my parents have worked all their lives at their small clothing shop until we’ve got what we have today. That’s all.”

The idea this tax might help address larger social ills also rings false, she says. “How is this law going to help reduce income inequality? Making the wealthy poorer doesn’t mean that the poor become wealthier.”

Some wealthy business people have different opinions.

Tan Passakornnatee, chief executive of green tea producer Ichitan Group, agrees with the government’s idea to use the tax as a tool to narrow economic inequality.

However, he urges the government to look carefully at the practices of other countries imposing the tax and to decide on a fair rate in order to encourage the rich to follow the law and prevent tax avoidance. He expresses concerns about possible capital outflows.

“Taiwan used to impose this tax up to 40%, which caused capital outflows that surely affected its economy. Then it reduced the rate to 5-10% and the capital flooded back in,” Mr Tan says.

He says the government needs to ensure transparency.

“The government needs to make sure that it will make the most use of this tax money while preventing all kinds of corruption that may occur.”

Vichai Tongtaeng, a lawyer and veteran investor, agrees with the tax but says the minimum value of assets to be taxed is set too high.

“I think the taxable value should start from 20 million baht rather than 50 million baht,” he says.

“I suppose a businessman like me or the rich should not be affected by this tax. The government could use this tax money to help the poor.”

The Prayut Chan-o-cha government is set to implement the tax next year.

According to several tax experts at international law firms, the possible implementation of the tax has alarmed the affluent to start planning and transferring their estate, mainly fixed assets, to their heirs sooner than they had planned.

“Some affluent parents are now starting to distribute equities to their children, while some investors are investing offshore right away,” says one expert. This is because the new tax is to apply only to assets located in Thailand, he adds.

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Source | Bangkok Post 22 September 2014

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