There are few policy decisions more sensitive for any elected politician than changes in the tax code. To be more accurate, few decisions are more politically touchy than raising taxes. After all, job security for any politician is directly tied to their popularity among voters. It takes a brave leader indeed to risk the ire of the populace by taking money from their pockets.
Of course, the converse is also true _ voters can forgive many sins committed by their leaders if at the end of the day they are perceived as helping them financially benefit, whether in the form of added public goods and services or more directly through lower taxes. But tax reform is rarely cut and dried, and more often than not stems from a complicated series of compromises engineered by politicians that results in benefits for some, losses for others.
Last year, Prime Minister Yingluck Shinawatra and her Pheu Thai Party pushed through one of the most important changes made in the Thai tax code in recent history with a cut in the corporate tax rate from 30% to 23% this year and to 20% in 2013. The change, which understandably met with strong support from the country's business community, was ostensibly aimed at improving Thailand's attractiveness as an investment destination and boosting the competitiveness of Thai firms. On the other hand, the cost of cutting Thailand's corporate tax rate to the second-lowest rate in Asean after Singapore is estimated at around 150 billion baht per year. Viewed another way, the government has agreed to reduce the tax burden for the private sector in exchange for potentially building fewer roads, schools and hospitals with the foregone revenues.