Thai politics: Wrong approach leads to wasted chance to cut inequality

[webfact]

BURNING ISSUE
Wrong approach leads to wasted chance to cut inequality
ATTHAYUT BUTRSRIPOOM
THE NATION

BANGKOK: -- ONCE PRIME MINISTER Prayut Chan-o-cha had ordered a delay in the plan to collect land and building tax, many people clearly felt relieved. They were glad the government had heeded the views of the opposition and not slammed through the scheme.

Their feelings arose because the land and building tax bill, if enacted, would have affected the middle-class and the grassroots more than the landlords, who should have been the main target group for a new tax law.

Actually, the land tax collection should have had one main goal - to reduce the social gap - by forcing the wealthy, who have plenty of land, to sell their plots so that those who are not rich, would find it easier to buy land.

It was expected that if the wealthy, who own a lot of land, sold their plots, land prices would drop.

Surveys have found that the top 10 families, combined, have the largest amount of land - about 1 million rai. Of course, some plots have been put to good use while others have not. And many plots were definitely bought as speculation in land prices.

However, the Finance Ministry admitted that the principle of the bill was not aimed at reducing the social gap. Instead, it was planned to allow the government to earn more tax revenue.

As a result, the land tax proposal had been integrated into the same package as the housing tax.

This would expand the scope of people affected if the bill was enacted. Although the Finance Ministry proposed an increase in the minimal price of taxable housing units and land from Bt1 million to Bt1.5 million, many people would still be affected.

This is because the prices of ordinary houses now start from Bt1 million and housing units in Bangkok are worth over Bt2 million each. These house owners are not rich - they are working or salaried people who have to struggle to pay their house instalments, at least Bt10,000 each month.

So, the land and housing tax would add to their already heavy burden.

As a result, it was the right decision for the government to delay the tax collection.

However, many people are also sorry because normally a law to reduce the social and economic gap would be hard for an elected government to enact.

This is because those who fund political parties always own a lot of land. Likewise, politicians, who have the power to enact new laws when they are MPs, also hold a lot of land. As a result, it is unlikely the politicians would enact laws that would affect their associates.

As a result, many people have had high hopes for this government that has repeatedly said it was not made up of politicians. The government has also told society it wants to reform the country and reduce social gaps.

But now the hopes of many have been dashed because the Finance Ministry used the wrong approach, tying two contradicting issues together, causing its goals to go astray, leading to strong opposition.

Whether the ministry made such an error out of ignorance or intentionally, the land tax issue has became both fortunate and unfortunate following the latest orders from Prayut. Now, the poor will not be loaded with a new burden. At the same time, the government has lost a chance to reduce the social gap.

As a result, the government should review the issue by giving it a new and correct approach from a fresh start.

Source: http://www.nationmultimedia.com/politics/Wrong-approach-leads-to-wasted-chance-to-cut-inequ-30256303.html


-- The Nation 2015-03-19

[Thai at Heart]

What? Force the rich to sell their land so that the poor can buy it?

That would be the point of this policy???? Where do they get these numpties from?

[Strangebrew]

What about this a fair tax system where all pay an equal share of the taxes. say if Taxes were set at 10% of income and Assets were taxed at a 5 % rate then those with homes and large blocks of land would be paying a fair share. And by income money earned on investments, businesses, saving accounts, rentals, with no deductions allowed. If a rich person was pulling in say 10,000,000 baht a month and was putting 9,000,000 out in wages and benefits then his net gain per month is 1,000, 000 in profit Which would be subject to a 10% tax. Or 100,000 baht per month. simple and fair. say if he invests in a business and it goes belly up no insurance to cover his loss Then he could use to off set any profit he made during the year. IE: said person had net gain of 20,000,000 million during the year but a business went belly up and he lost 15,000.000 baht his net gain before loss that year was 20,000,000 but with 15,000,000 baht loss his actual net gain is 5,000,000 baht which would be subject to tax of 500,000 baht at the 10% rate but there would need to be proof of loss If proof found to be false then penalty Of 50% tax of owed tacked on to owed tax. Plus all his land taxes of 5 % of market value of land not purchase price. If land sold during the year and person get below fair market value as long as it wasn't sold to family or friends can deduct loss from sale but all proceeds from sale subject to taxes less any land transfer fees and real estate fees/ broker fees paid by owner of land. Concerning transportation costs and lodging costs while conducting business which relates to earning income on business reasonable hotel bills and transportation costs can be deducted. So if said person stays in 5 star hotel and hires a high end hooker anything over a set standard room cost is out of his own pocket.

[Emster23]

Why would any of those in power wish to reduce inequality? What's in it for them?

[Srikcir]

The higher land and building taxes (as opposed to what is already in place) were never intended to cut income inequality but simply to raise for revenue for government programs. The alternative would be for the government to borrow funds, ie., issuance of treasury bonds, for which it would have to pay debt service. Since land and building taxes are value-based, they are essential progressive and do not cause income inequality. From that viewpoint the higher land and building taxes were not a wasted opportunity.

But the proposed higher taxes became untimely given the sharp economic downturn in 2014, continuing into 2015. Generally, in times of an economic depression or slower GDP growth, higher taxes of any kind, ie., VAT, are an unfair burden on the population as more income is consumed by higher household debt, rising consumer prices, and wage freezes. And that is why Prayut delayed the new taxes.

The Finance Minister delivered what Prayut ordered. And if the economy was recovering swiftly going into 2015, the new taxes would have been appropriate, albeit maybe with some further adjustments to avoid economic shock on the Thai population. For example, new tax rate hikes for single private residences might be lower than for commercial properties; there might be a phase-in of progressive higher tax rates on properties depending on how long the property has been held; exemptions for privately owned residences by persons over 60 years old, etc. The new taxes should be appropriate to the ability of the owners to pay the tax. And of course an owner can always avoid the tax by selling the property. For some businesses a capital loss might be even preferrable to a small taxable capital gain.

Unfortunately for the Finance Minister, Gen. Prayut's sudden reversal and indefinite delay of the new land and building taxes appeared to be more a personal issue with the Finance Minister and an effort to garner public support for Prayut's faltering leadership. As an unelected PM who controls the entire government and uses martial law to enforce his power, Prayut seems at times oblivious to any need to consider his relationship to those who work for him.

Edited March 19, 2015 by Srikcir

[lildragon]

Closing the gap in no way benefits the elite. This will happen when pigs fly.

[wprime]

Devaluing the housing market will force many poorer families who borrowed to buy their home to default. The mass of defaults will have a subsequent deflationary effect due to the decrease in money supply which will increase the value of cash based assets making the rich even richer, slow economic growth resulting in job losses and small business insolvency.

This guy obviously hates the poor and wants them to suffer.