Volume 7 Issue 1
January - April 2005         
SGA Bulletin
www.sgalegal.com
In this Issue:
Page
Liquor & Tobacco Tax Proceeds to Finance Healthcare Scheme
1
New Security Bill in Progress
1
New Changes in Tax Law - Filing Returns Exempted for Some
1
Thailand and New Zealand Sign FTA
2
Amendments to Social Security Act - Coverage for Retrenched Workers Only


2

Tax Perks for Listed Firms to Continue
2
Talks on Financial Services Suspended
2
Agreement on Services at FTA Talks
2
PM Ready for Biggest Legal Overhaul in Over 200 Years
2
New Optical Disc Control Act to Clamp Down IP Violations
2
CDRAC to Mediate Under New, Proactive Approach
3
Excise Department to Collect More Taxes from Massage Parlors
3
Thailand and Netherlands Sign Treaty on Prisoner Transfer
3
SET to Clamp Down on Rampant Disclosure
3
Foreign Trade Department to Counter Unfair Practices with New Bureaus
3
Commission Fines Budget Airlines for Deceptive Ads
3
Cabinet Approves National Identity Card Draft Bill Amendment
4
Appeal to Drop Intellectual Property from US Free-Trade Talks
4
Privy Councillor Pushes for Complete Overhaul of Court System
4
Legal Overhaul: Focus on Laws Violating Constitution
4
Amendment to Code Sought to Fight Illegal Money-Lending Practice
4
Provident Fund Contribution to be Deducted from Tax
4
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Liquor & Tobacco Tax Proceeds to Finance Healthcare Scheme

Finance Ministry officials announced in January that they are contemplating using 70 per cent of the revenue from liquor and tabacco taxes to finance the 30-baht healthcare scheme. This revenue will be directed to a special fund set up for the healthcare initiative. Currently, around 60 million baht per year has been allocated to the scheme, an amount which officials deemes insufficient to cover current expenses.

An estimated allocation of 1,700 baht per person per year is required to maintain the healthcare program, but with only 1,389 baht per person currently available there is a shortfall of 30 million baht in funding annually. Authorities are claiming that the diverted revenue from the liquor and tobacco taxes would reduce the funding shortfall and circumvent budgetary procedural barriers. Policymakers have yet to accept the proposal formally.


New Security Bill in Progress

Legislation to protect members of the security forces from legal action while they are following orders is underway, said the Defense Ministry in March this year. According to spokespersons, this legislation has become necessary safeguard since the anti-communist act was abolished. The new security law will also identify situations which demand Interior Ministry supervision and those needing a military operation.

The Deputy Prime Minister, who had been asked to arrange the drafting of the bill, said that Thailand had been slow in revising its security-related laws to include terrorism. He added that studies of internal security decrees in Indonesia and Malaysia are being carried out while the drafting of the bill is in progress.


New Changes in Tax Law -
Filing Returns Exempted for Some

The Revenue Department has disclosed in February that come next year, people earning less than Bt100,000 yearly may no longer be required to file tax returns. This is a result of proposed changes in tax law as well as changes to existing laws that are likely to take a year to implement.

Currently, those earning Bt30,000 upwards annually are required to file tax returns under the existing tax law. With the new changes implemented, the department hopes to eliminate the unnecessary filing of income tax for some. The new changes are believed to benefit self-employed personnel when the second phase comes into effect. However, annual tax rebate forms would still have to be filled out to claim tax rebates.


 

SGA Bulletin
Page 2
 

Thailand and New Zealand Sign FTA

Thailand and New Zealand have signed a free-trade agreement in April which will see duties eliminated on more than 10,000 products from both countries. Beginning in July, New Zealand will eliminate duties on 5,878 Thai products and Thailand will do likewise on 2,978 export items from New Zealand.

New Zealand will remove duties on an additional 1,555 items by 2015, including items from the sensitive list such as textiles, clothing and shoes. Thailand will excise import levies on the remaining 2,481 products from New Zealand by 2015. Three other agreements on labor, environment and a working holiday scheme were also signed by both countries.

Thailand and New Zealand traded US$500 million (Bt19 million) between them in 2003. Thailand's key exports to New Zealand include pick-up trucks, frozen shrimps, canned tuna and seafood, plastic pellets and products, furniture, gems and jewellery, seasoning made from cereal, electric appliances, cosmetics, glass and glass products, machines, and pet food.

New Zealand exports product items such as powdered milk and processed food for babies, fish and marine animals, wood and wood products, pulp and paper products, vitamins, and protein to Thailand.


Amendments to Social Security Act -
Coverage for Retrenched Workers Only

In a bid to overhaul the Social Security Act, amendments to the Act have been proposed in February to make it more responsive to current social and economic situations. Following the new amendments, only dismissed workers will be compensated for unemployment; workers who resign voluntarily will no longer be eligible. According to the proposed amendments, the board of directors from the Social Security Office will accept appeals for unemployment compensation by workers who resign, but approval will be considered on a case-by-case basis.

Currently, qualified unemployed workers who have contributed to the social security fund for a set period of time may receive 30 per cent of their last-drawn salary for three months under certain conditions. Although the international practice is to compensate only workers, Thai laws compensate workers who were forced to resign by employers who seek to avoid the consequences of laying off workers.


Tax Perks for Listed Firms to Continue

A spokesperson from the Market for Alternative Investment (MAI) disclosed in April that the Revenue Department has agreed, in principle, to continue providing tax perks for all companies listed on the SET or the MAI. However, it is not certain if there will be equal tax incentives for both markets and the amount of tax incentives has yet to be decided.

He added that the Revenue Department is also deliberating whether to limit the period for granting tax incentives or to make the tax perks a permanent fixture for all listed companies.

Talks on Financial Services Suspended

The Finance Ministry and the Bank of Thailand have recommended that financial services be taken out of the 22 issues under negotiation in the April free-trade talks between the US and Thailand, arguing that the three-year financial sector master plan of Thailand has just been implemented. However, the Commerce Ministry is ready to negotiate on the intellectual property rights (IPR) issue.

Other issues to be discussed during the latest round of free trade talks include investment, competition, goods, science and technology, trade capacity-building, textile, professional qualifications for services, dispute settlement, environment, telecoms and e-commerce.


Agreement on Services at FTA Talks

A preliminary free-trade agreement (FTA) between Japan and Thailand has been reached in March to allow Thai nationals to work in industries such as advertising, fashion design, tourism and exhibitions. However, both parties have not come to an agreement on the certification of labor standards.

The Thai Foreign Ministry has disclosed that in the wake of the recent exclusion of rice and spa-related services inclusion of farm products has yet to be determined in the FTA. The Ministry also said that details on labor standards and visa procedures still need to be ironed out. In addition, Thailand is seeking certification from Japan to allow Japanese patients to enter Thailand for medical treatment and have their medical fees reimbursed from the Japanese social security fund.


PM Ready for Biggest Legal Overhaul in Over 200 Years

Spokespersons for Prime Minister Thaksin Shinawatra have announced in March that the government is ready to undertake the biggest legal overhaul in more than 200 years with the amendments of 377 laws. Of  these 377 laws, 106 were deemed contradictory to the constitution, 21 were considered archaic, and 30 were characterized as infringing on people's rights.

PM Thaksin disclosed that Thailand has been inhibited by many antiquated laws and amending these laws would empower the people. He added that legal reform has long been overdue and an overhaul is necessary for eliminating injustice and corruption. PM Thaksin believes that revising these laws would strengthen security and aid future social and economic development.


New Optical Disc Control Act to Clamp Down IP Violations

A spokesperson from the Intellectual Property Department announced in April that a new act will be enforced in July to govern the production, import and use of machinery, and the licensing of CD production. The Optical Disc Control Act, already approved by the Parliament, is aimed at curbing rampant CD piracy. (Continued on Page 3)


 
SGA Bulletin
Page 3
 

Under the new law, owners will be required to report to the IP Department and register their machinery and the number of discs produced. A sign and code would also be embedded in every disc produced for inspection by authorities at a later date.


CDRAC to Mediate Under New,
Proactive Approach

The Corporate Debt Restructuring Advisory Committee (CDRAC) of the Central Bank has disclosed in February that it will act as a mediator between performing debtors and their creditors under a new approach. Performing debtors are those who are servicing their debt or who have not defaulted on payments for three months or more.

Previously, the CDRAC has mediated in only two cases with multiple creditors. With the new approach, the CDRAC would also act as a mediator for non-performing debtors whose debts turned bad before 31 December 2004, and who are under legal prosecution which has started within the past year.


Excise Department to Collect More Taxes from Massage Parlors

The Excise Department said in January that it has plans to tackle the legal loopholes present in the current tax collection system relating to massage parlors by collecting more excise taxes from the operators.

Currently, the department only collects a 10 per cent levy from massage parlors, a percentage derived from the calculation of revenue based on a 900-baht service charge per customer as suggested by parlor operators. The department is not looking at raising the rate of levy but plans to make collection efforts more effective, with more practical guidelines for its officials to follow.

Excised tax collected from massage parlor services for the first two months of fiscal 2005 amounted to 35.25 million baht. For the full fiscal year of 2005, the department is targeting a 183.6 million baht collection from such businesses. The department is also considering excise tax collections from online gaming operations.


Thailand and Netherlands Sign Treaty on Prisoner Transfer

A ratified Thailand-Netherlands treaty on prisoner transfer and cooperation in penal sentence enforcement comes into effect this April. The treaty which was signed at The Hague in August 2004, would allow prisoners who have served a minimum jail term, or a quarter of their sentence, to serve out the remaining sentence in their home countries.

However, this is not applicable to offenders serving drug-related life sentences. Such offenders would have to serve a minimum of eight years in prison to become eligible. Currently, there are about 30 Dutch prisoners in Thailand and one Thai prisoner in the Netherlands.


SET to Clamp Down on Rampant
Disclosure

The SET is prepared to take a tough line on companies which do not comply with disclosure regulations. The exchange said in February that it is closely monitoring share price and volume movements in a bid to clamp down on speculation and unfair access to information.

If a company circulates information in trading rooms or in the media before SET has been formally notified, the company's shares would be suspended pending clarification. The SET, the Securities and Exchange Commission, and government agencies are also working together to make sure that all information is disseminated in a fair and accurate manner.


Foreign Trade Department to Counter Unfair Practices with New Bureaus

The Foreign Trade Department will set up two new bureaus to fight unfair practices that may result from free-trade agreements (FTAs) signed with the other countries. The department disclosed in February that the measures are meant to ensure that Thailand is protected from unfair non-tariff barriers and to prevent dumping.

The Trade Measures Office will closely monitor the swift changes in trade regulations and policies among Thailand 's trading partners. The Trade Privilege Development Office will focus on encouraging Thai exporters to make use of tax privileges under the FTAs. A Safeguard Act is also being drafted to ensure that retaliatory measures can be enforced against imports without delay. The new structure is set to be in operation on March 1.


Commission Fines Budget Airlines for Deceptive Ads

Three budget airline Nok Air, Thai AirAsia and Orient Air were each warned and fined Bt150,000 for misleading consumers with their ads in February this year.

The Consumer Protection Commission disclosed that consumers have filed complaints that the airlines use fine print for restrictions but mislead consumers with their headline-grabbing cheap rates. The three airlines are eligible to appeal to the commission within 30 days.


 
SGA Bulletin
Page 4
 

Cabinet Approves National Identity Card Draft Bill Amendment

The cabinet has approved, in principle, a revised draft of the National Identity Card bill in March this year. The revised bill would require newborns to have identity cards within 60 days of birth and children under 15 to apply for identity card within one year. Currently, identity cards are only issued to children who turn 15.

The amendment, drawn by the Interior Ministry, was in line with the government's policy to issue new smart identity cards. The new microchip-embedded card will hold personal information such as date of birth, current address, blood type and tax information.


Appeal to Drop Intellectual Property from US Free-Trade Talks

More than 1000 activists from 30 civic groups staged a six-kilometer walkathon to demand the removal of intellectual property from the April free-trade talks with the United States. Many vegetable and diary farmers are still reeling from the severe impacts of the China and Australia FTAs. In addition, slum dwellers are worried that public utilities concessioned to foreign operators might result in a price hike in utility charges.

However, the head of the Trade Negotiation Department has reassured people that only copyrights and trademarks have been tabled; patents involving grains, drugs and organic material have yet to be discussed.

Meanwhile in the US, Democrats are urging US President George W Bush to take a tougher stance on intellectual property in the bilateral free-trade agreement talks with Thailand. The Democrats argued that copyright and trademark violations and non-tariff barriers in Thailand and other countries have contributed to the historic high trade deficit in the US. They are urging President Bush not to sign a free-trade agreement with Thailand unless substantial progress has been made to reduce piracy and protect intellectual property rights.


Privy Councillor Pushes for Complete Overhaul of Court System

At a function attended by over 500 judges and judicial officials in April, the Privy Councillor voiced his sentiment on the court system and pressed for a judicial reform. He has proposed various measures for the overhaul such as lessening judges' workload by hiring a secretary for every judge; using the internet for recording statements from plaintiffs and witnesses; undertaking a conciliatory approach to settle legal disputes; and subjecting judges to internal scrutiny to assess their morals and work ethics.

Legal Overhaul: Focus on Laws Violating Constitution

The government has announced in April that over 100 laws in violation of the constitution should be amended. Additionally, tens of thousands of rules, regulations and royal decrees need to be examined in regard to their constitutionality.

A spokesperson from the Democratic Party said that the party will propose numerous bills that abide by the constitution, including bills for setting up independent organizations on consumer protection, the environment and public hearings. He added that laws on technology and electronic crimes should also be amended to enable authorities to keep up with the new changes.


Amendment to Code Sought to Fight Illegal Money-Lending Practice

An amendment to the Civil Procedure Code is being sought by the Attorney-General's Office this April to enable debtors to have effective legal defense in court against loan shark syndicates. Under the current code, the court is bound by law to abide strictly by the loan contracts which generally favor the creditors, and debtors can only use the law in cases where fraud can be proven. The Office is also proposing an amendment to the Code to raise the penalties for loan sharks charging more than 15 per cent interest annually.


Provident Fund Contribution to be Deducted from Tax

Under a proposed amendment to the provident fund law, a professional can contribute to the fund by claiming deductions against personal income tax and expense claims. The Finance Ministry said in March 2005 that employees would be allowed to increase fund contributions without requiring the employer to match the contribution. In addition, the current minimum contribution, set at two per cent of the monthly salaries, would be scrapped. Current laws prohibit independent professionals from establishing their own provident funds.

Finance Ministry officials disclose that the government is finalizing plans to introduce a mandatory provident fund system. The new system would require all companies to establish a fund for employees, with a set 2.5-3% contribution of the monthly salary.

For companies that implement voluntary and mandatory provident funds and participate in the Social Welfare Fund, authorities may offer incentives as encouragement. Expected to come into effect in 2007 or 2008, the mandatory fund program will cover companies with one or more employees earning a minimum monthly salary of 15,000 baht.

 
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