- Thailand scraps plan to institute a 15% withholding tax on cryptocurrency transactions after responding to pressure from industry stakeholders
- Thailand is taking a more cautious approach in regulating cryptocurrencies, especially given the experience of the 1997 Asian Financial Crisis which saw large outflows of money from the country
The land of a thousand smiles just added a few more as Thailand has scrapped plans to impose a 15% withholding tax on crypto transactions after facing a blowback from one of Southeast Asia’s biggest markets for cryptocurrencies.
Blessed with white sand beaches and azure blue waters, Thailand has been a hotbed, attracting talented software developers and engineers from all over the world, to be used as a base for developing their cryptocurrency projects.
But the coronavirus pandemic has punished Thailand’s tourism-dependent economy, and strained national finances, which prompted Bangkok to consider taxing its burgeoning crypto-economy to add to depleted coffers.
However, given the high level of mobility of a new breed of crypto-preneurs, Thai tax officials backed down this week from a potential 15% withholding tax on crypto transactions, and instead earned income from trading or mining could be reported as capital gains on income tax.
Traders will also be allowed to offset annual losses against gains made in the same year, meeting demands from those in the nascent industry who had warned that the excessive taxes would kill off a sector in its infancy.
Cryptocurrency trading expanded rapidly in Thailand during the course of the pandemic, and many Thais took to play-to-earn games like Axie Infinity to supplement their incomes which had been ravaged as the pandemic all but cut off income from tourism.
Before the pandemic, Bangkok was the world’s most visited city and Thailand’s many beaches and resorts were crowded with Europeans and Americans in search of their slice of tropical paradise, with tourism generating about a fifth of Thai GDP.
Thai regulators still have fresh in their minds the stings of the “hot money” outflows from 1997-1998 during the Asian Financial Crisis, which saw the national currency the Thai baht, eviscerated and have adopted a cautious approach towards regulating cryptocurrency.
Bangkok is understandably concerned that cryptocurrencies could be used in capital flight.
The Bank of Thailand and the country’s Securities and Exchange Commission support the development of financial technologies such as blockchain, but are not of the view that using cryptocurrencies to pay for goods and services would add much benefit to consumers and businesses.
