Tax reform a priority
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Tax reform a priority

As the country gears up to hold the next general election, tentatively scheduled to take place in May, political parties are ramping up their efforts to outdo each other, touting populist policies in an attempt to woo voters.

These parties are making a lot of noise ahead of the election.

The Palang Pracharath (PPRP) and United Thai Nation (UTN) parties are relatively modest in their promises to voters -- both pledging to hand out a 700-baht a month subsidy to about 14 million state welfare cardholders. The Pheu Thai Party, meanwhile, is pushing to raise the minimum daily wage to 600 baht, which appears to be quite effective at attracting voters in light of the soaring cost of living, especially in Bangkok.

The 3,000-baht monthly subsidy for pensioners proposed by the Move Forward Party will certainly entice older voters -- as many older, retired people who are under 70 years old are currently only receiving 600 baht a month in assistance from the government. (Those over 70, meanwhile, receive 700 baht a month). The scheme would cost the government about 420 billion baht, the party said, which would be partially funded by cuts to the armed forces' budget, among others.

Unsurprisingly, the Bhumjaithai Party has gone down the same populist path, proposing a moratorium on household debt repayments for three years.

The big question that needs to be answered is whether or not the politicians making these promises will follow through on them if and when they are elected to office.

Unfortunately, it has become a habit for politicians to tout populist "social welfare" schemes without spelling out the sources of funding. Simply put, these politicians are very used to writing cheques they can't cash, with little regard for accountability.

For instance, Pheu Thai's promise to ensure a 25,000-baht minimum starting salary for fresh graduates seems to be far-fetched. No government agency, let alone a private company, would hire a recent graduate at that rate. While the policy is unlikely to come to fruition, the buzz surrounding it had employers talking about moving their production bases to countries with lower minimum wages.

While many politicians push for social welfare policies, very few talk about Thailand's outdated taxation system, which relies on far too few revenue sources -- namely the value-added tax, other levies such as excise duty on imports, and corporate taxes. Worth noting is the fact that only about five out of the 10 million salaried "middle-class" individuals pay income taxes. Land taxes are low, and so are inheritance tax rates -- the Ministry of Finance collects less than one billion baht from taxed inheritances each year.

At the same time, certain sectors benefit from generous tax deductions and exemptions, all in the name of spurring investment, not to mention perks given by the Board of Investment (BoI) to foreign investors. As such, political parties must think outside the box to fund their populist promises -- which, in some instances, have led to abuses of power and corruption.

Politicians need to look at ways to expand Thailand's tax base, for example, by incentivising more small- and medium-sized enterprises -- especially those in the gig economy -- to register with tax authorities. They also need to come up with bold reform measures, especially for inheritance and land taxes to make the system fairer for everyone and promote equality.

Without significant reforms to the tax system, these promises risk remaining a pipe dream.


Bangkok Post editorial column

These editorials represent Bangkok Post thoughts about current issues and situations.

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