PROBLEMS CONCERNING FLAT-RATE EXPENSE DEDUCTIONS FOR PERSONAL INCOME TAX UNDER SECTION 40(8) OF THE REVENUE CODE
Keywords:
Personal Income Tax, Revenue Code Section 40(8), Standard DeductionAbstract
This research article aimed to: 1. analyze the problems and obstacles arising from the application of a single standard deduction rate for assessable income under Section 40(8) of the Revenue Code in conjunction with Royal Decree (No. 629) B.E. 2560 (2017); 2. comparatively analyze Thailand’s legal principles and tax measures concerning expense deductions with those of Singapore, Hong Kong, and Malaysia; and 3. propose guidelines for improving the law and expense deduction system to enhance fairness and align with prevailing economic conditions. This study employed a qualitative research design comprising documentary research on laws, official documents, academic literature, and foreign laws, together with field research involving in-depth interviews with 20 key informants from four groups and a focus group discussion with 10 experts. Data were analyzed through legal interpretation, comparative analysis, and legal synthesis.
The findings revealed that 1. The application of a single standard expense deduction rate of 60 percent does not reflect the differing cost structures of various types of businesses, resulting in tax burdens for certain groups of entrepreneurs that do not correspond to their actual net profits and creating formal equality rather than substantive tax fairness. 2. Singapore, Hong Kong, and Malaysia place greater emphasis on the nexus between expenses and income and on taxation based on actual net profits, thereby providing greater flexibility than Thailand’s single standard deduction system; and 3. A hybrid system should be developed by differentiating expense deduction rates according to cost structures, allowing taxpayers the option to deduct actual expenses, and introducing Safe Harbour measures for small-scale entrepreneurs. Relevant provisions concerning Section 40(8) of the Revenue Code and Royal Decree (No. 629) B.E. 2560 (2017) should also be amended to accommodate the proposed system. These approaches were synthesized into the FAIR-40(8) Model, which seeks to establish a balance among tax fairness, ability to pay, tax collection efficiency, and the Iddhipada 4 principles.
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