I am in Thailand and have lived here for over 20 years.
The police are the police in Thailand. Your judgment of them doesn't change their authority.
I would notify them if someone did something I considered illegal that greatly concerned me. In the case cited in this forum, 200, 500, or even 1,000 baht would not be of great enough concern for me to report it to the police. If the concern were over money, it would have to be much more than that, at least 5,000 baht or more like 10,000 baht or more.