Income tax, equality, and the Thai budget
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Income tax, equality, and the Thai budget

Voranai in an op-ed in the Bangkok Post titled “Income tax could become the great equaliser”. Key excerpts:

Do you feel singled out, victimised? Has this democracy treated you unfairly? Are you one of only about three million Thais paying income tax? If so, raise your hand, because, blast it all, we should demand equality!

Thailand has a population of around 70 million. According to the National Statistics Office, the 20-and-over workforce comprises about 38 million people. But the Revenue Department only has approximately 10 million people registered to pay income tax. Of these, around 6.87 million do not have to pay because their annual income is less than 150,000 baht per year.

So that leaves a little more than three million people actually paying income tax. Some of us do not pay as high a percentage of our income as others, but at least we pay. If you’re one of the three million who give 5% to 35% of your monthly paycheque for the greater glory of our beloved Kingdom of Thailand, please stand up for your rights and demand equality!

There are many problems with Thai democracy. For starters, when the system is not administered equally, how can we expect equality? How can our democracy be healthy?

The Revenue Department anounced plans to collect 1.7 trillion baht in income tax between October, 2012, and September, 2013 _ and that’s from only a little more than three million people _ 8% of the workforce and 4% of the total population.

Equality means equality _ one man, one vote, that’s how it should be. But here’s the problem: One man sheds tears of pride at the end of every month seeing that 5% to 35% of his hard-earned money is contributing to the greater glory of the Kingdom. Another sheds tears of anger and sorrow upon hearing that the government plans to reduce the guaranteed rice paddy price from 15,000 baht a tonne to 12,000 baht. He breathes a sigh of relief when the government changes plans and continues to use tax money to subsidise rice at 15,000 baht per tonne.

BP: Below is the tax collection for fiscal year 2012 (October 2011-September 2012):

Source: Revenue Department

NOTE: Units are in millions. So the total is actually 1.617 trillion baht.

BP: This talk of taxpayers and only limiting it to personal income taxpayers* is a theme that comes up often – see BP’s critique of a similar article in The Nation last year – but it is very misleading. There is a high threshold before those earning money pay personal income tax, but personal income tax only accounts to one-sixth of the overall tax revenue collected by the Revenue Department.** The vast majority of tax revenue collected by the Revenue Department is through corporate income tax and VAT so it is factually incorrect to say the Revenue Department will be collecting 1.7 trillion from income tax.

Those who don’t pay personal income tax also pay VAT and other forms of taxes where the money goes to the state. There is a reason for this tax structure and that is that consumption taxes, such as VAT, are seen as more efficient. From the OECD in a report:

“So, overall, these arguments provide strong support for the view that a move in the balance of taxation towards taxes on consumption would be likely to improve economic efficiency and increase growth”.

BP: Should we move to a different tax structure just so more people were paying personal income tax even if this was less economically efficient? Of course, there comes a point where having a high rate of consumption tax, such as VAT, means the tax is regressive, but is a 7% VAT and the high threshold before the payment of income tax such a bad thing?

* Voranai refers to income tax, but he actually seems to mean personal income tax only as opposed to corporate income tax as corporations can’t vote (yet)….

**Government revenue is higher than tax revenue collected by the Revenue Department as the government has other incomes sources, such as income from state enterprises and excise tax (cigarettes, alcohol) etc. Hence, if you were to include these revenue sources it would be significantly less still than one-sixth.