Prime Minister Prayut Chan-o-cha has instructed the Finance Ministry to study the possibility of reducing the controversial land and buildings tax to only a land tax.

"The government remains committed to pushing the new land and buildings tax within this term," he said on Friday.

"Tax collection must be based on the principle that people who are rich or control bigger land plots should pay more, while people who are poor and have fewer land plots should pay less."

A ministry source said the change would mean houses, residential buildings, offices and other buildings would not be charged under the new tax structure.

"Cutting buildings out of the tax bill will make it more flexible and reduce discretion difficulties for local administration officials," the source said.

"It will also foster greater transparency, as current dwellings come in many styles — detached houses, townhouses, condominiums, commercial buildings, traditional Thai houses and unique local homes such as the traditional kalare houses of northern Thailand."

If buildings are to be included in the tax, people will see it as unfair and adding to their financial burden, particularly those repaying housing loans, the source said.

The effective tax rate, which is charged in accordance with the actual value of the land and building, will add to the tax burden of the middle classes, state officials and state enterprise officials, notably in Greater Bangkok, where land and building prices surge each year, the source said.

Gen Prayut on March 12 decided to shelve the ministry's bill on the tax for further study, citing the economic slowdown and possible effects on low-income earners.

The bill has faced mounting public criticism from those concerned about an additional burden even though the Finance Ministry has repeatedly offered tax allowances to allay their worries.

The land and buildings tax is among the government's priorities as it seeks to narrow economic disparity and increase the government's revenue streams to help fund long-term development projects.

Based on recent ministry proposals, homeowners would be charged 0.1% of the appraised value. Land for agricultural and commercial use would be taxed at 0.05% and 0.2%, respectively.

Houses with an appraised value of up to 2 million baht would receive a 75% tax allowance, translating into a 250-baht tax payment for every 1 million baht.

Residences with an appraised value of 2-4 million baht would receive a 50% tax allowance, with homeowners liable to pay 500 baht for every 1 million on amounts exceeding 2 million but no more than 4 million baht.

For houses with an appraised value of more than 4 million baht, owners would pay the tax in full at 1,000 baht for every 1 million for amounts exceeding 4 million baht.

The present local development tax and house and land tax have generated just above 20 billion baht a year due to the high number of exemptions and loopholes that allow people to evade payment.

If the land and buildings tax takes effect, it will contribute an estimated 200 billion baht a year to state coffers, but the figure is likely to be less than half that if buildings are excluded.