Time For The Thai Govt To Get To Work On Tax Reform

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EDITORIAL

Time for the govt to get to work on tax reform

By The Nation

Close tax loopholes and ensure fair rates and collection to provide a sustainable basis for greater equality

The Abhisit government may now be looking toward the general election but it can do a great service to Thailand if it can lay down a concrete path for tax reform before it dissolves Parliament. After all, tax reform is what the government has been touting all along - claiming that such reform can ensure Thailand will enjoy fiscal stability in the future.

The government has talked about the idea of tax reform for a long time but no substantive effort has been made to fulfil the promise. Let's hope that a recent meeting between the Finance Ministry and the Thailand Development Research Institute (TDRI) - in which TDRI President Nipon Poapongsakorn called for effective tax reform - will lead to another push for action. If there is no concrete effort to address the issue of tax reform, Thailand may be left vulnerable to another fiscal crisis in the future.

Reasonable tax collection should be able to help address social and economic inequality. The corporate and personal income tax rates should be adjusted to help promote investment and consumption. However, the current tax system has been lenient on some, especially the well-off, while tax collectors try to squeeze payments from low-income earners and salaried workers.

For instance, the Thai estate tax has not been effective in collecting tax from the wealthy on the property they own. A series of tax deductible measures also provides unnecessary benefits for the wealthy, such as deductibles on long-term investment funds on the stock market.

The current system provides a number of loopholes that people exploit to avoid paying tax. These loopholes can be reflected in the relatively small number of taxpayers in Thailand. Currently, 26 million people are of working age, but just 10 million pay personal income tax. Both rich people and small-business entrepreneurs, such as vendors, avoid paying taxes in spite of their income levels.

The current system does not contribute to the effort to address this inequality. Rather, it provides greater privilege for those who have access to opportunity. For instance, the reasonable property tax should have promoted more efficient use of property. But now, some landlords are encouraged to acquire more property without utilising it. They simply wait to sell when property prices go up, because they are not subject to appropriate charges for land and property assets.

Tax reform should be used to help maintain the country's fiscal stability now that the Abhisit government has spent an increased amount of money on the public welfare system. At the moment, our tax money is being spent to subsidise fuel prices, electricity bills and the public transport system, among other populist measures - all designed to get the government re-elected at the next election. The Abhisit government's "Pracha Wiwat" populist measures have indeed raised concern over future fiscal stability.

The government has to ensure sustainable financial resources to support its spending. Public spending on social services and welfare has increased greatly in the past few years. For instance, in fiscal year 2010, public healthcare spending amounted to Bt89 billion, a figure that has increased to Bt101 billion under the current budget. Public healthcare spending has risen from Bt1,300 per person in 2003 to Bt2,490 today.

The government's policy to provide free education for 15 years will cost Bt80 billion annually. Welfare spending for the elderly will certainly increase along with the size of the elderly population, which will increase from 11 per cent of the population now to 22 per cent within 20 years.

While some of these policies may be beneficial to certain sections of the population, they require a sustainable policy plan to ensure a continued source of revenue. Increased revenue from effective and fair tax collection should help the government promote public investment in other areas such as education.

Tax reform should enable the Finance Ministry to achieve its target of balancing the budget within five years, because it will draw more tax revenue into the country's coffers. Taxpayers do not mind paying reasonable rates if their tax money is spent to benefit the country in a sustainable manner by promoting welfare benefits for the needy and addressing the income gap between the haves and the have-nots.

-- The Nation 2011-03-01

[Ricardo]

It would be good to see specific proposals, on what new taxes to introduce & what levels to set them at, as a major campaign-issue in the forthcoming election.

The current coalition-government's plans (also the changes already introduced) for an growing Welfare-State do need to be funded, so they should spell out how they will do this, also the more-socialist (presumably ?) 'protectors of the poor' should detail their policies, so that the electorate have something tangible to base their decisions on.

But I'm not holding my breath on this, as there are too many 'dark forces' and vested-interests and party-funders on-all-sides, who IMO might not wish to see these sort of ideas publicly-discussed !

[Colabamumbai]

All vendors street wise or otherwise should have to buy a permit to sell. Without a permit the police should close them down and confiscate their goods. This would be a start.

Then they would be registered as a vendor and if they don't report an income, they should be fined. Try selling goods on the street in most countries in the world and you will last 5 minutes before the police clear you out.

[Robby nz]

there are too many 'dark forces' and vested-interests and party-funders on-all-sides, who IMO might not wish to see these sort of ideas publicly-discussed !

Dead right mate.

This is the great problem that Abhisit has, the shower he has to work with.

This must be a great restriction on what he can do regardless of what he wants to do.

Should the Dems win the upcoming election, which looks very likely, then hopefully he will be able to kick out some, if not all, of the worst offenders.

I suspect he already has a list of those who he wants to work with him in the future for the good of the country and not for self interest.

Wouldnt be surprised if he was prepared to go outside party ranks to get them.

Must be a few honest, well intentioned, educated people in the opposition parties.

Try selling goods on the street in most countries in the world and you will last 5 minutes before the police clear you out.

One of the great things about Thailand, free enterprise is allowed to work without a lot of Govt restrictions.

The street vendors are not the people the Govt should be going after.

[SICHONSTEVE]

there are too many 'dark forces' and vested-interests and party-funders on-all-sides, who IMO might not wish to see these sort of ideas publicly-discussed !

Dead right mate.

This is the great problem that Abhisit has, the shower he has to work with.

This must be a great restriction on what he can do regardless of what he wants to do.

Should the Dems win the upcoming election, which looks very likely, then hopefully he will be able to kick out some, if not all, of the worst offenders.

I suspect he already has a list of those who he wants to work with him in the future for the good of the country and not for self interest.

Wouldnt be surprised if he was prepared to go outside party ranks to get them.

Must be a few honest, well intentioned, educated people in the opposition parties.

Try selling goods on the street in most countries in the world and you will last 5 minutes before the police clear you out.

One of the great things about Thailand, free enterprise is allowed to work without a lot of Govt restrictions.

The street vendors are not the people the Govt should be going after.

Quite agree!!! Lets face it - a majority of them only just about earn enough money to put food on the table.

Another thing.

"Taxpayers do not mind paying reasonable rates if their tax money is spent to benefit the country in a sustainable manner by promoting welfare benefits for the needy and addressing the income gap between the haves and the have-nots".

This is so easy to say, but just see how many will bleat about it if it actually happens!!! Its amazing how many will 'change their tune' when the tax man comes asking for this money. Let's be honest, how many people have sponsored somebody for a good cause only to be dismayed when they come to ask you for your 'pledge money' (which you'd forgotten about doing as you agreed to sponsor them for running the London marathon 2 months ago) - despite it benefitting multiple sclerosis sufferers or the blind, it's still painful parting with your hard earned fiver, believe me, I've been there I'm ashamed to admit!!.

[ib1b4]

I am with you all the way, keep the peasants in their rightful place .and rule over them with iron fists?

All vendors street wise or otherwise should have to buy a permit to sell. Without a permit the police should close them down and confiscate their goods. This would be a start.

Then they would be registered as a vendor and if they don't report an income, they should be fined. Try selling goods on the street in most countries in the world and you will last 5 minutes before the police clear you out.

[marquess]

Tax reform is admirable but until corruption is reduced then it might be like putting more water into a leaking bucket!