Bill targets populist spending

Bill targets populist spending

Cabinet seeks more financial discipline

Authorities check the quality of rice stocks kept at a warehouse in Bangkok, as the cabinet was passing a proposed amendment aiming to ban future populist programmes like the rice-purchase scheme of Pheu Thai. (Photo by Seksan Rojjanametakun)
Authorities check the quality of rice stocks kept at a warehouse in Bangkok, as the cabinet was passing a proposed amendment aiming to ban future populist programmes like the rice-purchase scheme of Pheu Thai. (Photo by Seksan Rojjanametakun)

The cabinet yesterday approved a draft monetary and fiscal bill which includes controls on spending for populist policies. The move is aimed at preventing future fiscal problems and enhancing transparency in the state fiscal budget.

The act will form part of the new constitution. 

According to Finance Minister Apisak Tantivorawong, the bill aims to close a loophole that allows the government to squander cash in the state coffers on any populist purpose, eventually leading to fiscal problems.

One such example is the former government's rice-pledging scheme.

The Pheu Thai-led government subsidy, which pledged to buy paddies at prices 40-50% above market value, has cost 878 billion since its launch during the larger crop growing season for 2011-12. The scheme's total losses are estimated at 400-500 billion baht.

Political parties in previous years have raced to offer populist policies aimed at winning votes. The draft bill, if it comes into force, will strengthen Finance Ministry officials' ability to control budgets.

Mr Apisak said initial discussion among related agencies had ended in agreement that off-budget expenses for the government should not exceed 5% of the fiscal budget, while the central budget set aside for emergencies and other necessities should not be above 3-4%. Debt repayment, in turn, should be 3% of the fiscal budget.

He said the draft bill would also entail high accounting standards and call for more budget allocation in remote areas to help villagers improve their quality of life.

The Council of State will be asked to further discuss the legislation, and the draft bill may require additional consultations from the Bank of Thailand, the National Economic and Social Development Board, the Budget Bureau and the Fiscal Policy Office.

Proposals to draft such a bill first arose after the 2007 constitution came into effect, when a lack of fiscal discipline set off alarm bells at the ministry.

In a related development, Mr Apisak said the cabinet yesterday had approved a draft bill on social enterprises which aims at encouraging large companies to support such organisations.

Under the bill, social enterprises would be exempt from paying corporate tax on condition that the organisation contributed at least 70% of its profits to social activities.

Parent companies that invest in social enterprises will be allowed to deduct their investment costs, financial costs and donations from their annual corporate tax burden.

The cabinet yesterday also agreed to amend the Small Industry Credit Guarantee Corporation Act to upgrade the Thai Credit Guarantee Corporation (TCG), a state-owned specialised financial institution under the supervision of the Finance Ministry, to provide wider financial services and greater loan access to small and medium-sized enterprises.

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