Tax increase should be judicious, says Nobel laureate

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Tax increase should be judicious, says Nobel laureate
Erich Parpart
The Nation

BANGKOK: -- Taxes should be hiked only if the government has good reasons for doing so - such as using the extra money to increase the country's competitiveness and enhancing education, economics Nobel Laureate Prof Sir James Mirrlees said.

In an exclusive interview with The Nation, Mirrlees said that standards should apply especially with regard to progressive taxes like inheritance, real estate, and capital gains.

"Some countries have succeeded in collecting more than 50 per cent of the national income, so in principle you can collect as much tax as you want but presumably there is no point in collecting taxes if there is nothing good to spend on," he said.

"People naturally will not be keen on paying extra taxes if they do not think that the money would be spent on something that they value."

Mirrlees is to give the keynote speech at the 5th Asean Bridges event series facilitated by the International Peace Foundation at the University of the Thai Chamber of Commerce. (UTCC) in Bangkok today.

He said one thing a country could do was concentrate on taxing something that relatively few people had and tax should be more for high-income earners while at the same time an efficient government would be needed to introduce the progressive tax.

Commenting on the inheritance tax, Mirrlees said as far as he knew there were very few countries that could raise a lot of revenue by collecting tax from a legacy but it made sense to have some inheritance tax.

"It is surprising how many countries do not have inheritance tax but you need to set a whole administration, as introducing a new tax is always at some expense to business," he said.

Mirrlees said the current value-added tax in Thailand, which was lower than 10 per cent, was not that high when compared to the international standard and other Asean countries.

But the alternative would be to raise the income tax rate because it was more efficient than raising tax on merchandise, although many Asian countries still thought that collection was more efficient from sales taxes rather than income taxes, which was the wrong practice.

He is also in favour of a capital gains tax but it should be adjusted in line with inflation because people with significant capital gains were reasonably well off while its rate should be above the normal rate of return on assets.

He said introducing a foreign direct investment tax would depend on whether the country wanted to promote foreign business in the country.

But many countries saw the benefit of foreign direct investment without introducing a high tax on it, although it should be taxed.

Mirrlees said that to increase taxes on the rich to provide to the less fortunate and to lessen inequality "would certainly strengthen the case for doing so. This is called redistribution".

But he said the question was, how much? And the problem was that a country needed an efficient government to do the distribution.

Source: http://www.nationmultimedia.com/business/Tax-increase-should-be-judicious-says-Nobel-laurea-30244348.html

-- The Nation 2014-09-29

[jaltsc]

"People naturally will not be keen on paying extra taxes if they do not think that the money would be spent on something that they value."

That is why they don't declare their income or put it in a bank account where it would also be taxed on interest.(albeit not nearly as much as income tax). This way they know the money will be spent on something they value....Themselves

[Upset]

Here In Thailand....tax money is used to promote Politicians popularity and also most of it goes into the pockets of corrupted politicans, corrupted government officals, corrupted police and army personnel and also corrupted businesses who are all called thai hi-sos!

[shirtless]

Look to the west, we are taxed so much due to governments reckless spending and expansion, most people dont have a pot to piss in, but government employees live the high life while over regulating ours.

[Obb]

"He said one thing a country could do was concentrate on taxing something that relatively few people had ..."

Uhhh, like a conscience?

Or is this the LUXURY TAX that should obviously be implemented in most of the world right now.

[Commerce]

How about starting off with receiving tax from BIB shortcomings? As in, they use official fine books, computerised, with recorded numbers page by page, and if pages are missing then they must explain why. 3 pages missing and you're out! Official 7 day chance to pay an OFFICIALLY recorded fine for driving the wrong way, or speeding.... or ad hoc. The revenue would be enormous.

[rickirs]

Looks like Nobel Laureate Prof Sir James Mirrlees read a really good book on taxation....regurgitates well-known and used tax strategies. Thus, I find his viewpoints "taxing."

Inheritance, Estate, and Gift taxes the world over have been proven lucrative in income distribution (upwards to 50% tax rates!) and in a society ruled by an elected government representative of the middle class, there is little the wealthy can do to prevent or dilute such taxes. But there must also be equitable tax policies that encourage people's continued investment in the nation's economy. With dollar exemptions to the tax that tend to avoid over taxation of the middle and lower classes, these tax devices can become dependable long-term revenues sources. Ladislav Hornan, Chairman of UHY, comments: “Inheritance tax has become a big earner for the UK Treasury ..." But once again, the governments need to gve attention to make effective ise of such proceeds that will grow the wealth of the nation to raise the standard of living for all its citizens.

[jaltsc]

"He said one thing a country could do was concentrate on taxing something that relatively few people had ..."

Uhhh, like a conscience?

Or is this the LUXURY TAX that should obviously be implemented in most of the world right now.

I believe you meant to say a "FANTASY TAX"

[belg]

money tax money in this country = more will disappear in the pockets of the few & happy

very rich people have expensive lawyers & accountants to find loopholes anyway

why no 10% VAT on everything..that would be fair & equal to everybody

I come from a country, where if you work, the governement steals 50% of your income to start with (to give to the lazy immigrants that never seem to find a job)

and you pay 21% VAT

so we already have 71% TAX

plus when you inherit, you pay 30-40 or 50% on that

TAX = LEGALISED STEALING

so take from the middle class to give to ? the uneducated ones ?

why not invested money in education ? and I don't mean tablets ...

that people could build their own future ...

raise a bunch of believers they are the best, better than everyone, with no skills, and you get low class farmers, factory workers ...

but that would be not good for any governement, if people start thinking for themselves, instead of being told or paid what to do and who to vote for ...

Edited September 29, 2014 by belg

[timewilltell]

The professor clearly has no understanding of how things work in Thailand. The rich pay ridiculously low taxes because they hide everything. Income tax is only efficient if people declare their income or you have expert tax inspectors who are skilled in forensic accounting. The people who end up paying are the employees who cannot escape the regimen. They are not rich by and large.

Sales tax is another anomaly here. Everyone knows that most places will willingly give you goods without sales tax unless you want an invoice - in which case the 7% is then added to the price and usually a different book is used to issue a note of the purchase. This is rampant throughout the kingdom.

Taxes they are miraculously recovered are received with thanks and go into the corruption pool. So there is a further issue.

Inheritance tax is odious in my opinion and income tax on earnings is little better. Collection of VAT is relatively straightforward since you only need to worry about businesses (fewer investigations needed than people) and it is usually easier to trace payments and link purchases to sales. It is also easy to build up a profile of profit for various business types which can be used to expose abusers. It is also a tax than can be progressive where luxury goods attract higher rates - a bit like the taxes on imports that are mainly consumed by foreigners which are set very high. Further rich people spend more than poor people so will automatically pay more tax.

I think Thailand is so inept at most things governmental that a simple system effectively enforced would do a great deal better than multiple systems that are usually poorly drafted, poorly understood and ineffectively enforced.

Let people make as much as they like and tax it all on spending. A property tax would also be a useful addition although likely to be passed down to those renting this targeting the wrong demographic.

Sent from my iPad using ThaiVisa app

[DrTuner]

Taxes should only be hiked if there's no one left to be kicked out of a government job.

[chainarong]

It's not about taxing , it is catching those who don't pay their fair share or pay very little, there should be a concentrated effort with little or no talk to examine the ways and the transparency of western governments, you don't need to tax the living Sh!!t out of the poor, remember a high tax scale will detract people coming to work in professional area's and company profits , are they being sent off shore to Ireland, like some well known companies are doing in other countries.

[HUAHIN62]

Thailand don't need more taxes they only need to collect all the tax under the existing law's.