Assessing Tax Incentives for Investment: A Case Study of Thailand

Abstract

This study examines Thailand’s tax incentives for investment. It takes into account important tax provisions under standard and preferential treatments, and computes effective average tax rates (EATRs) applied to the country’s focused industries. It then compares Thailand’s EATRs with those of ASEAN peers. Such industry-specific lens is crucial since the tax benefits offered as well as the composition of investment assets can vary substantially between industries. It finds that, Thailand’s tax incentives are broadly comparable to those of its ASEAN peers. Under the maximum incentives, the EATRs range from 6-9% depending on the investment intensity in each industry. This suggests that, with the exception of targeted incentives for the biotech industry, there is not much need to expand tax or monetary incentives. The results also indicate that accelerated depreciation and investment tax allowances are two options that may perform better than tax holidays in term of minimizing the incentive redundancy.