SpicyTricks

* Published: 16/05/2011 at 12:00 AM
* Newspaper section: Business

The Democrat Party wants to offer companies new tax breaks in exchange for salary hikes for new employees
FinanceMinister Korn Chatikavanij, in an interview with the Bangkok Post, saidthe policy would target workers earning less than 15,000 baht per year.

Companiesthat commit to increasing salaries for workers would be allowed to takespecial deductions against their corporate tax liabilities equal to asmuch as four times the additional cost in payroll expenses.

MrKorn said that unlike a policy floated by the Democrats' main rival,the Pheu Thai Party, this plan would target all low-income workers.

PheuThai earlier said that it would offer guaranteed starting salaries ofat least 15,000 baht for new bachelor's degree holders entering theworkforce.

"Our aim is to help ensure that all workers earn at least 15,000 baht per month," Mr Korn said.

The finance minister added that the programme would be a voluntary "win-win" venture between the private sector and the state.
Participatingcompanies would benefit thanks to tax breaks, while the economy overallwould gain a boost from the increase in household incomes.

MrKorn said the programme would effectively eliminate any added cost forparticipating companies while directly benefiting workers and thepublic.

And while the policy would seem to come at the cost oftax revenues, Mr Korn said it would have no broad impact on fiscaldiscipline or commitments to return to a balanced budget by 2015.

The Democrats and Pheu Thai will campaign heavily on economic issues in the runup to the vote on July 3.

Whilerecent data show the Thai economy continuing to expand well thanks tostrong exports and domestic spending, the rising cost of food, fuel andother basic essentials has shaken consumer confidence.

Bothparties have rolled out lavish platforms to win votes using subsidiesand wage hikes, prompting warnings from the private sector about thepotential cost to businesses. The Thai Chamber of Commerce last weekwarned that raising minimum wages by 50 baht per day for 5 millionworkers would cost companies 90 billion baht a year. It saidpolicymakers would do better to focus more resources on skills trainingand tax reforms to increase competitiveness.

But Mr Korn insisted that while the two parties may have similar aims, the difference is in the details.

Hecited the farm price guarantee programme as one example. It wasinitiated by the Democrats and offers a minimum crop price for farmersbased on market benchmarks.

In contrast, Pheu Thai has vowed toscrap the programme and return to the former crop mortgage programme,in which the government essentially becomes the "buyer of last resort"for farmers.

Mr Korn said the main difference between the twowas that price guarantees offer compensation directly to the farmers,while the mortgage programme was open to abuse by intermediaries suchas rice millers and imposed added costs for storage and wastage for thegovernment.

Price guarantees also offer farmers compensation incases of crop losses due to natural disasters, while the mortgageprogramme imposed additional risks for farmers as payments were basedon output.

"The two programmes may require the same amount of[state funds]. But the results are completely different. Under theguarantee programme, the money goes directly to the farmers, not tomiddlemen or corrupt officials," Mr Korn said.

He said voters faced a clear choice, with a vote for the Democrats representing a vote for stability and policy continuity.

Buta victory for Pheu Thai would potentially plunge the country into freshinstability, particularly as the party has pledged to facilitate thereturn of its de facto leader, former premier Thaksin Shinawatra.

Thaksin,whose younger sister Yingluck is leading the Pheu Thai campaign, hasbeen in self-imposed exile since 2008. The Supreme Court last yearfound Thaksin guilty of abuse of power and ordered the seizure of 46billion baht in assets.

"How will [Pheu Thai] erase [Thaksin's]crimes? Will they enact a new amnesty law? Overturn the judgement ofthe Supreme Court? The judgement has no meaning? I don't think this ispossible under the rule of justice," Mr Korn said.

"The PheuThai Party says Thailand needs Thaksin. [The Democrat Party] doesn'tthink so. We must move forward. Over the past two and a half years, wehave overcome numerous obstacles, and I am confident that we canaccomplish much more."

Mr Korn said the choice was clear. "I amsure that if [the country] decides to return to the past, we are onlyinviting numerous risks upon ourselves. The choice for voters isobvious. Move forward or move backward."