Thailand told to cut subsidies and seek more revenue

[Lite Beer]

IMF
Thailand told to cut subsidies and seek more revenue
The Nation

BANGKOK: -- Thailand's financial authorities should consider revenue-enhancing measures, like higher consumption and property taxes as well as a cut in personal income tax credits, to maintain its commitment to fiscal discipline, said the International Monetary Fund.

In the conclusion of the Article IV Consultation with Thailand, it also urged the Kingdom to further reduce generalised energy subsidies and replace the rice-pledging scheme with budgetary transfers targeted to low-income rural households.

Despite Thailand’s commitment to fiscal discipline, the IMF’s staff showed concerns over the public sector’s finances.

The IMF’s staff estimated that the central government fiscal deficit will rise to 3.4 per cent of gross domestic product in the 2013 fiscal year against 1.7 per cent in 2012, mainly due to lower corporate tax rate and tax relief granted (including for car and home-buying, and fuel taxes).

Moreover, the deficit of overall public sector which includes off-budget investment projects is projected to rise from 1.5 per cent of GDP in the 2011 fiscal year to 4.2 per cent by 2014. Meanwhile, the public debt ratio is projected to exceed 53 per cent of GDP in the 2008 fiscal year.

"These projections are based on currently stated policies and a broadly favourable economic environment."

In the report, which summarised what the bilateral talk covered, the authorities told the IMF that they are confident that they will achieve their medium-term fiscal goals, including a balanced central government budget by 2017 and keeping public debt below 50 per cent of GDP.

They explained that their strategy is based on three pillars: containing recurrent spending; adjusting excises, including on sumptuary goods and fuel; and expanding the tax base through strengthened tax administration. They noted that a number of measures have already been taken or proposed to Parliament for next year's budget, including an increase in diesel excises, expiration of first-buyer tax incentives, and ongoing efforts to improve the efficiency of tax

collection.

Other measures, in particular, additional spending cuts, would be introduced
gradually over the coming budget cycles, at a rate that would reflect economic conditions. The
authorities noted that Fund staff projections did not include the future spending cuts and
therefore showed a somewhat higher path for the central government deficit and public debt
ratio.

To the IMF, the authorities stressed the critical importance of public infrastructure projects for inclusive growth, noting that financing them off-budget would improve implementation.

They estimate that the projects would contribute an average of 1 percent of GDP per year to the economy during the construction phase, and that improved logistics would reduce costs by 2 per cent of GDP per year.

The authorities explained that similar projects were tried unsuccessfully twice in recent years - they were crowded out by more urgent expenditure priorities during the budget discussions or delayed owing to political transitions.

In contrast, the authorities cited the example of the off budget programs approved to address the GFC, which have been more successfully implemented by a series of successive governments.

The authorities also assured that the project review process would include Parliament and thereby ensure full accountability and transparency of the programme's implementation.

-- The Nation 2013-11-12

[brit1984]

try explaining that to the electorate

[i claudius]

try explaining that to the electorate

Dont be silly old Somchai sitting next to his rice field in Isaan will understand it perfectly and i am sure will be discusing it with his group over lunch.

[waza]

"The IMF’s staff estimated that the central government fiscal deficit will rise to 3.4 per cent of gross domestic product in the 2013 fiscal year against 1.7 per cent in 2012, mainly due to lower corporate tax rate and tax relief granted (including for car and home-buying, and fuel taxes)."

The debt is getting bigger, the recession is going longer, inflation is getting higher, the only thing going backwards is quality of life. Thanks Thaksinomics.

Is no one listening? The International financial institutions are sending Yingluck public messages of warning, the Thai business sector has joined in, the governments own bureaucrat are sounding the alarm. The government even claim business is funding a protest movements against them. Why cant they see that The Thai economy is heading for a financial riceberg? The financial direction of this proud nation need to be altered to avoid a financial crash. But instead it not only full steam ahead but they want to increase that debt by another 2.5 trillion baht, unbelievable.

Edited November 12, 2013 by waza

[alant]

"The IMF’s staff estimated that the central government fiscal deficit will rise to 3.4 per cent of gross domestic product in the 2013 fiscal year against 1.7 per cent in 2012, mainly due to lower corporate tax rate and tax relief granted (including for car and home-buying, and fuel taxes)."

The debt is getting bigger, the recession is going longer, inflation is getting higher, the only thing going backwards is quality of life. Thanks Thaksinomics.

Is no one listening? The International financial institutions are sending Yingluck public messages of warning, the Thai business sector has joined in, the governments own bureaucrat are sounding the alarm. The government even claim business is funding a protest movements against them. Why cant they see that The Thai economy is heading for a financial riceberg? The financial direction of this proud nation need to be altered to avoid a financial crash. But instead it not only full steam ahead but they want to increase that debt by another 2.5 trillion baht, unbelievable.

I see it is Thaksins fault again. What would everyone do if he was not there to blame?

I also would bet, if that was legal, that the public debt ratio for Thailand is rather better than many nations who elect to have the higher taxes or austerity the IMF are advocating, such countries as the USA, UK, Greece, France, Spain, Ireland and on it goes.

Who is right? and if it's Thailand, does Thaksin get the credit?

[belg]

property taxes, just like in the western countries !

would be nice to see some tax on big land owners that do nothing on their land except speculating

but... big tradition chinese families and the one we cannot talk about, have 90% of the country in their hands and they will never allow it anyway

[brit1984]

how about a sex tax?... decriminalize prostitution and re-direct funds (away from bribes to the police) to tax revenue

or a (low) fixed rate independent retailers' tax?... get more cash businesses to report/ pay tax (in return for a pension/ similar)

[Asiantravel]

try explaining that to the electorate

Dont be silly old Somchai sitting next to his rice field in Isaan will understand it perfectly and i am sure will be discusing it with his group over lunch.

old Somchai cant afford lunch because he hasnt been paid yet

http://www.indiainfoline.com/Markets/News/Thailand-Governments-Delay-in-Paying-Farmers-For-Rice-In-Pledging-Scheme-Causes-Fall-in-Paddy-Prices/5104542828

[Emdog]

Corruption is a subsidy, cut that. What was that flood prevention plan, where perhaps two percent was actually spent on flood control? But corruption might be considered an "essential service". And real estate lack of taxing..... no reason to use land productively. House here on beach road in Jomtien, was probably nice once, been sitting empty for 8 years at least that I know. Taxes can be an incentive to actually do something. I never thought I would be in favor of real estate taxes but..... what they don't pay gets made up for by the poor with the 7% VAT on about everything else.

[laocowboy2]

The IMF always issues two versions of its country reports. The public ones (like this one) are always fairly anodyne - as is this one. The non-public one (for internal IMF use and for the government of the country concerned) tnds to much much more detailed - and much more direct. Unless you have access to the full version, you have to (to some extent) read between the lines.

What I read is that the IMF believes that the government's budgetary plans are unsustainable - and likely to cause serious damage in the long run. They therefore need to cut out wasteful subsidies (that go to the wrong people) and deal with poverty issues by better directed welfare payments - less money overall but more benefit to the really needy. They are also concerned that the revenue base of the government is too narrow - hence the suggestion of new taxes to widen the base (which would also allow other taxes to be reduced).

This is actually quite a sharp 'shot accross the bows' by the IMF.

[PETERTHEEATER]

The headline states (past tense) Thailand told......

The first sentence states 'should' which is probably more accurate since I don't think that the IMF is in a position to dictate to foreign governments unless they have loaned or gifted them money from the fund.

[mmh8]

I try to relate this to my home countries domestic policies or what have yous. the saying is something like government will be as incompetent as it can be in the most expensive inefficient manner......before it can be improved.

I guess this is what is happening here, though why they need to watch another couple of billion baht dissapear is ridiculous, but the lesson will be learnt surely, someone will come along maybe the IMF in this case and show how economically this is not sustainable.

[Pib]

Instead of raising taxes to cover your bills, why not lower the cost of your bills (i.e., spend less or at least flatline your spending)....or is spending less taboo in Thailand like it seems to be in most western countries.