We are all in the red
Lower taxes is a great principle, but in order to be able to afford low taxes our expenses must not exceed our income, otherwise we will need to borrow from our children, and perhaps even from their children.
In Thailand, where the divide between the business elites and the working class is known to be large, there must be very good reasons why we choose to reduce the burden of business owners rather than reduce the burden for salary earners. However, if one insists in helping the business elites, then businesses must somehow compensate society at large.
Today, Thailand's budget deficit is Bt300 billion per year, add a few extra 100 billions for out of budget borrowings and you have a country that is spending much much more than it is earning. If the government wants to lower corporate tax from 30% to 23% to 20%, (Thailand's corporate tax rate has been slashed from 30% to 23% since 1st January 2012, and from 23% to 20% starting 1st January 2013) profits for corporations will shoot up by Bt150 billion per year. Therefore, if we want to lower taxes for a certain group - say the corporations - it better be for an extraordinarily brilliant reason.
The Democrats have said all along that a drop in corporate tax rates must be compensated with increase in investment or better welfare for workers. The government may even choose to push through with it's election pledge of securing a minimum wage of 15,000 baht for
university graduates in exchange for lower taxes, but the government chose not to do even that.
Most recently, commercial banks have benefited immensely from lower corporate tax rates, bank profits for the second quarter have risen over 20% - partly thanks to lower taxes and partly thanks to a increasingly wider net interest margin (i.e. difference between interest for loans and deposits.) The corporations have clearly benefited from this government's tax policy, but the average man on the street have gained nothing. The government could have negotiated a quid pro quo for the benefits of consumers, but did not, thus wasting a one-time opportunity.
Looking at the 2013 annual budget and looking at where the money is coming from I can't help but be alarmed, the fiscal burden on the "salary man" is increasing but the relative responsibility for the corporations is decreasing! How does this make any sense?
Middle class wage earners get the short end of the stick, but the corporate elites pay less taxes. The business elites also benefit from rising share prices as a result of lower corporate tax rate, but are exempt from capital gains tax and, if they put their gains in real estateare, also exempted from land tax (this government refuses to push forward the Democrat sponsored land-tax bill in parliament.)
So the question I leave to you is, is this government fighting for the masses or are they actually fighting for the interest of the elites?
Some may associate elitism with class, but in reality I would argue that elitism is more closely tied with capital and monetary wealth.
And when those with capital gain access to political power, that's when you have a bona fide monopoly.
It seems that, like it or not, we're all in the red now.
Korn Chatikavanij is former Finance Minister and Deputy Democrat Party Leader
