The new government should focus more on tax restructuring, as it is the key to maintaining fiscal discipline amid greater need for infrastructure investment and spending on social programmes, economists say.
In the first in a series of Krungthep Turakij-Nation election forums, this time focusing on fiscal security, Somchai Jitsuchon, research director of the Thailand Development Research Institute, said that in the past five years, government revenue had only barely covered expenses. This had prompted the need to borrow to finance investment projects. There is a problem in the tax system that needs to be fixed, he said.
Korbsak Sabhavasu, the chief campaign strategist of the Democrat Party, which is vying for the largest number of seats in Parliament in the next election, responded positively to the suggestion.
However, rather than seeking to widen the taxpayer base, he said the new tax structure would be more biased towards resource consumption.
“Hardworking people should not be greatly taxed, but those who consume lots of resources should be subjected to higher taxes,” he said. There should be tax reform within one year, he said.
Somchai suggested a reduction in corporate income tax, adjustment of promotional privileges provided by the Board of Investment, increase of valueadded taxes and excise taxes, and expanding the revenue base of personal income tax.
“The new world is engaged in high valueadded [activities] and tax incentives are less important,” he said. “Now, VAT [in Thailand] is far lower than the international level and is ranked in the last 10 countries in a survey that covers more than 100 countries. It may be time to raise VAT. Also, everyone should be taxed on taxability without any exceptions.”
Somchai suggested lower BoI tax privileges in return for reduced red tape and improvement in the investment environment. Taxation by taxability means the base would encompass some rich farmers and housewives who earn a living through rents. Property taxes should be imposed, which could generate Bt90 billion per annum in revenue.
Now, collected taxes account for 17 per cent of GDP, while the World Bank suggests 20-21 per cent, Somchai said.
Adjusting the structure should generate about Bt300-Bt400 billion more in annual government revenue. That should leave the state with enough money to invest in infrastructure and basic welfare and cap the public debt ceiling at no more than 60 per cent of gross domestic product, he said. “Then, there would be no problems with the fiscal stance.”
Sakon Varanyuwatana, associate professor at Thammasat University’s Faculty of Economics, also asked for accelerated tax reform. Those taxed at 30 per cent corporate income tax are small enterprises while large companies are listed on the stock market and enjoy tax savings.
The political sector should focus on efficiency and leakage and that might be an answer for the lack of political continuity, said Kampon Adireksombat, a senior economist for Siam Commercial Bank’s Economic Intelligence Centre.
The series will run throughout this and next month, focusing on political parties’ campaigns on energy security, education, healthcare, the environment, mega project investment, competitiveness and corruption.
Source: The Nation