The governor of the Stock Exchange of Thailand (SET) said initial coin offering (ICO) startups typically pay 7 percent in value-added (VAT) and a 20 percent in corporate tax. At the same time, the Thai tax authorities have exempted technology giants like Facebook, Google, and Line from paying VAT. Panitchpakdi believed that such an unleveled field was choking Thailand’s startup ecosystem, for they no longer could experiment freely under a stiffer regulatory and tax framework.
“In Singapore, such a digital asset law does not exist. The Singaporean government allows startups to innovate products before introducing regulations,” he added. “In Singapore, the government permits the private sector to use public data. Grab was able to launch its innovative ride-sharing service, known as Grab Bus. [Yet] Grab is still illegal in Thailand.”
Panitchpakdi stretched his argument by including the Thailand tourism industry. The governor feared the presence of tax-exempted global players had choked the growth of similar services that were operating out of Thailand. A typical Thai tourism startup was shedding more money in taxes-per-sale than a Booking.com or Agoda, which was eventually limiting its expansion.
“Why are large companies exempt from taxation? How can we allow this to happen?” he questioned.
Tax Competition
Thailand, like any other developing country, is all about attracting investments and creating perfectly squared nine-to-five jobs for its people. Multinationals, at the same time, look for jurisdictions that put the minimum tax burden on them. The process eventually turns into a bargain deal, where countries like Thailand willfully bend tax rules to attract multinationals.
These bigger corporates also take huge benefits by setting up their bases in developing countries. They typically manipulate accounts to declare more profits in low-taxed jurisdictions. As a result, they rake in more profits back to their headquarters to make their shareholders happy.
Top Reasons Startups Fail : (( https://t.co/nCDuaH0vzS #PMFIT? –> #custdev/ #sgblank & #businessmodelcanvas pic.twitter.com/wT8Qc6Zxgi
— YanThoinet??? (@YanThoinet) February 16, 2015
The sum of all troubles falls on startups. They begin in an already-unlevelled playing field, bear more financial risks than an established company, and face more scrutiny due to weak political support. The ones that manage to bypass the early difficulties get acquired or merged by a bigger giant – in most cases.
“We need a system where startups [including ICOs] can experiment,” said Panitchpakdi. “Otherwise, Thailand will never find its unicorn startup, whose value exceeds $1 billion.”