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The International Journal of the Royal Society of Thailand
Volume XII, 2020

Vendors in open-air markets who are seen to have significant business
can be checked by RD officials and the officials can require the traders and
their banks to supply relevant information and documents such as bank accounts

for inspection. If RD officials do not agree with the reported amount of gross
income they can revise the estimate, demand additional tax and impose fines.

More recently the RD has introduced various incentives to induce
small businesses to register as legal entities and to keep a single set of accounts
that can be used to provide information for tax returns and credit applications.

Expense deductions
The assessment of expense deductions for contracting and business
income is difficult because expenses vary hugely depending on the type of

business and employment status of the people involved. Nevertheless it seems
likely that current rules that allow self-employed, professionals and other
employers with unincorporated business to claim substantial expenses as a
percentage of gross income without additional documentation are over-generous
in many cases.

For non-business income including income from employment, there is a
ceiling on the absolute amount of expenses that may be deducted and for some
items such as dividend income, no deductions are allowed. For business incomes,
expenses may be calculated at varying percentage rates for different activities.
Before January 2017, these ranged from 10% for the rent of assets other than
buildings, agricultural land, non-agricultural land, and vehicles to 70% for
contracting, 80-88% for activities such as fishing, agricultural processing,
rice milling, salt farms and 92% for sales of immoveable assets like land under
less than one-year ownership.

From January 2017, the maximum percentage deduction for contracting
and other business incomes has been reduced to 60 percent of gross income. If tax
filers wish to claim expenses above these levels, they must be ready to provide
proof in the form of receipts. The RD has the power to operate spot checks within
2 years. If the check discovers any discrepancy, any deduction above the ceiling
rate is forfeit, and additional tax may be imposed together with a fine. Hitherto
businessmen who claimed in excess of standard percentage deduction rates were
few and well known to the RD. As the standard deduction is reduced it may be

164 Towards A Fairer Personal Income Tax

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