Target the top of Thailand's pyramid

The government has made it clear that one of its top priorities is to restructure the entire tax system so as to boost revenue. Motivating the move is the need to find funding for massive infrastructure projects. Prime Minister General Prayut Chan-o-cha has also vowed that the reformed system would be fairer. But promising taxpayers a better deal is one thing, and delivering quite another.
There’s no doubt that restructuring the tax system is an arduous task that is testing this administration to the hilt. The first attempt was swiftly challenged. The Finance Ministry was poised to go ahead with a proposed land and property tax when it was hit by a barrage of criticism. The critics said it would hurt low-income earners and asked why rich landlords and those with two or more properties weren’t shouldering more of the burden. First-home homeowners still paying mortgages should be exempt from the scheme, they suggested. Prayut reacted promptly and slammed the brakes on the tax’s implementation. He has instructed the ministry to study its long-term effects in a bid to avoid overburdening lower-income earners.
Unofficial figures suggest that six million people own 90 per cent of the land in Thailand. It should not have been so difficult to target the top of the pyramid first with the new tax. Drawing more tax from those who own more than one property would also help prevent investors speculating on rising land prices. This, in turn, would improve land utility.
 Taxing the rich more without squeezing more money from the poor is a hard nut to crack. The land and property tax is one of two schemes initially slated for launch last year but now facing delays. The other is inheritance tax, which first saw light as a law under the government of Pridi Banomyong before being quickly scrapped, and it’s never progressed beyond the planning stage in recent years. The post-coup Surayuth Chulanont government tried to reintroduce it in 2006, but backed off in the face of arguments that such laws could only be passed by elected lawmakers. However, the tax plan was not taken up by subsequent elected Parliaments.
 The speedy introduction of the inheritance tax would no doubt bring cheer to low- and middle-income families, which would fit the government’s claimed goals.
In fact, few would argue that the tax system needs reform. Only 15 per cent (Bt70 billion) of the revenue target for this year has so far been collected. Meanwhile, only 20 million people in a population of 68 million currently pay taxes. Tax collection must be more effective. Areas so far relatively untouched, like land and property, should be subject to fair and efficient schemes. On top of that the government should close loopholes that currently exist in taxation of the corporate sphere and of stock investors.
The government will win plenty of public support in restructuring the tax system if it can broaden collection fairly and eliminate mechanisms that favour the rich. We would have no complaints if the new structure brings in more revenue while leaving the poor with the little they have intact.