Everyone has to pay their fair share of revenue

US President Barack Obama is calling on Congress to increase taxes on millionaires. Although the plan – scheduled for a vote in the Democrat-controlled Senate on April 16 – stands little chance of passing Congress, the refreshing proposal from the president has revived the debate about making tax collection fairer to all groups of people.

The proposal, made during this US election year, may be part of an effort to portray the Democrat Party as a champion of economic fairness. It could also be a reaction to comments made by Warren Buffett, the billionaire investor, who said that wealthy people like himself pay a smaller share of their income in US federal taxes than middle-class taxpayers. In making this proposal, Obama will want to have voters compare his tax stance to that of the Republicans. Despite the political motives, the president’s proposal – which was first made last September – has provoked new debate about social injustice. 

The question over fair tax collection also resonates among taxpayers in Thailand. This country certainly needs reform to create an effective system under which every citizen can financially support national development commensurate with their ability to pay. Thai government officials often talk about the need for tax reform, but realistic changes have never materialised. Thailand currently uses a progressive income tax system, with taxes on personal income charged at five rates: zero per cent, 10 per cent, 20 per cent, 30 per cent and 37 per cent for people earning Bt4 million or more per year in taxable income. The progressive rate is designed to keep inequality in check, with the richer paying more and the poorer paying less. However, loopholes in the system have made tax collection ineffective and unjust. Income tax fraud and evasion are widespread; across the business sector, in agriculture, and in the informal economy, names never appear in the tax collection system. 

Meanwhile, the rich manage to exploit the loopholes to evade paying their fair share, and are assisted by waivers for such items as special investment income. The hard-working middle classes are squeezed in between. 

Thailand’s tax base is small. The country has an estimated 10 million individual taxpayers, but only around 2 million actually pay taxes. Bangkok accounts for more than 65 per cent of total taxes collected by the Revenue Department, in terms of geographic location. It is essential the tax collection base become more diversified.

The loopholes are leading to wider debate over tax payment. The recent decision by the Revenue Department not to collect Bt12 billion in tax incurred by Panthongtae and Pinthongta Shinawatra from the convoluted sale of ShinCorp shares by their father Thaksin (to them and eventually to Temasek Holdings of Singapore) is among these topics. The Revenue Department decided not to pursue a case against Panthongtae and Pinthongta, citing a court decision that the shares actually belonged to fugitive former premier Thaksin, not his children. 

The verdict raises the question whether the Revenue Department will apply this kind of lenient treatment to ordinary people, especially when there are issues regarding tax assessment. 

As US President Obama tries to dissuade Congress from providing tax exemptions to people “who don’t need them”, Thai Prime Minister Yingluck Shinawatra should consider a similar course of action in order to reduce the economic disparity in Thailand, which only seems to be getting worse. The government needs to adopt a holistic approach in striving for comprehensive tax reform. The current system allows tax evasion by the rich to be too easy. Unpalatable and controversial (for the rich) taxes may have to be introduced and enforced, including inheritance tax, capital gains tax and land tax for speculators. Big landowners should also be appropriately charged. 

All citizens must be reminded that tax payment is a duty, and that revenues raised are used to support and promote education and public health, among other essential services. We need to become aware that we all have a duty to contribute to social welfare and justice through fair and equitable tax payments.