Plan to fund an ageing society
The government has been urged to raise value-added tax and review tax incentives such as those concerning investment in long-term equity funds (LTF) and retirement mutual funds (RMF), so as to boost revenue in light of an increase in expenditure related t
If VAT were to be raised from 7 per cent to 10 per cent, the government would have sufficient revenue to cover the extra expenditure required for a better quality and quantity of welfare amid a rising elderly population, the Thailand Development Research Institute (TDRI) suggested in its latest research.
Commissioned by the Social Development and Human Security Ministry, the paper by senior researcher Yos Vajragupta showed that overhauling the tax system was necessary, as funding for elderly programmes risks being affected by economic uncertainty and the government’s fast-track policies.
“People of working age tend to live a single life. In the next 10 to 20 years, they [many of them] will become old [reach retirement age]. They should save now to help support themselves [later in life] on top of the government’s programmes,” he said.
He said Thais of working age should be saving now to help support themselves, on top of the government’s programmes, after they retire.
At present, an investment of up to Bt500,000 in an LTF – inclusive of provident funds or contributions to other obligatory saving schemes – is tax-deductible, on condition that the investment is held for at least five calendar years.
The same level of deductible applies to investment in an RMF.
However, as both LTFs and RMFs have been major drivers of the stock market, Finance Minister Kittiratt Na-Ranong earlier insisted that there would be no change in the incentives, despite their being considered by many to favour the rich.
The TDRI research showed that in 2010, people aged 60 or over accounted for 12 per cent of Thailand’s population, and suggested that the proportion would rise to 25 per cent by 2030.
People in this age group will demand both a better quality and quantity of welfare, which will entail more government funding.
IN DIRE NEED
Of the current total, 100,000-140,000 senior citizens are in dire need of financial support, according to the research.
Despite elderly allowances and free medical services, the government is yet to address duplication and inequality in the welfare system, Yos said in his paper.
The researcher has come up with three models to address the problem.
First, a package of elderly allowances, comprising social security (pensions), homes for the elderly, funeral-service support, a special financing institute for seniors, and a national savings fund.
Second, on top of the first package, there should be an increase in the allowance for the elderly to about Bt4,085 per month.
Third, a support system should be put in place that is backed by other social parties, such as youth volunteers and social enterprises.
Yos estimated that in the period from 2012-2021, these models would annually require Bt170 billion to Bt460 billion, Bt170 billion to Bt500 billion and Bt170 billion to Bt510 billion respectively.
Against an estimated average 7-per-cent expansion in gross domestic product, the costs would account for 7.9-10.2 per cent of government revenue and 1.6-2.4 per cent of GDP, he added.
