How to turn Thailand’s oligarchy into a fairer society for all 

Thailand is taking steps towards addressing its reputation as the third worst country globally for wealth inequality, a status confirmed by Credit Suisse. Still, the amounts raised will be insignificant and inequality is still increasing. Further taxation to redistribute wealth and support upward mobility of the poor and middle class should be introduced. This change can follow a sound scientific basis for the ideal economy, with the social democratic model of the Nordic bloc as the leading contender.
The number of Thais below the poverty line increased by nearly 20 per cent in 2015-2016, with 5.81 million now living in poverty. One reason for the wealth inequality is Thailand’s tax profile not being employed to redistribute wealth. Thailand’s tax revenue as a percentage of GDP is at 17 per cent. This is far below the EU rate of 40 per cent and the OECD 2016 average of 34 per cent. These numbers indicate that taxation can be increased to curb the wealth gap.
One major argument in favour of redistribution of wealth via infrastructure projects and supportive services is harmony through equality. Thomas Piketty’s argument that the rate of return to capital is always higher than the overall rate of growth, contributing to greater wealth inequality, is patently visible in Thailand, with its Gini coefficient for wealth inequality being as high as .70. Such disparity is visible to the lower and middle classes, affecting social cohesion and causing socio-political “elite versus grassroots” cleavages. In an open market, this gap will grow over time, and therefore state interventions are necessary.
Recent research by Chulalongkorn University (CU) academics Chris Baker and Pasuk Phongpaichit, the “Towards a More Equal Thailand: A Study of Wealth, Power, and Reform” project, reveals that Thailand has a staggeringly high land Gini coefficient of 0.88, with the top 10 per cent owning 61 per cent of land and the bottom 10 per cent owning only 0.1 per cent. It also notes that a variety of means to reduce inequality is important for Thailand’s economic progress.
The inheritance tax introduced in February 2016 was the first such tax in 72 years. Applying to inheritances over Bt100 million, it is projected to reap  Bt30 million to Bt1.9 billion annually. However, fewer than 10,000 individuals are likely to be impacted, and most of them will not be the super-rich but rather the upper middle class who do not have access to skilled financial planners. The overall amount raised is paltry. The threshold should be significantly reduced and the rate significantly increased if the tax is to have any weight. The current rate of 5 per cent is minuscule when compared to the 40-55 per cent of leading OECD countries.
The government is also considering a draft Land and Property Tax, to replace the current Building and Land Tax and Local Development Tax. Currently, these two existing taxes generate approximately Bt25.9 billion and contribute less than 10 per cent of total tax revenue. The new tax could generate Bt64.2 billion by levying varying tax rates on first-home owners and farmland worth more than Bt50 million, as well as on vacant land and land for commercial and industrial use. This new tax aims to reduce income disparity, expand the national taxpayer base, increase tax revenue for local administrations, and improve land use by reducing land banking. Notably, the draft bill is still a weakened form of an earlier draft which sought to raise Bt200 billion. Thailand needs to stand firm on enacting effective tax laws to achieve sufficient wealth redistribution.
Also, the CU project recommends a cap on the total amount of personal income tax exemptions claimable of Bt700,000. Further, it recommends cancelling the long-term equity fund allowance, a holdover from Thailand’s IMF programme intervention to boost the stock market. In addition, income tax evasion should be targeted. Better administration of existing taxes will potentially add another five per cent as a percentage of GDP to tax revenue. 
Higher taxation empowers those in need through better services. Higher taxation means higher salaries, which would attract better-qualified teachers. Educational laboratory equipment would be widely available. Multiple choice exams would be replaced by more stimulating ones. Classroom sizes would be reduced. Thailand’s scores on international standardised tests, such as PISA, would improve. Better education begets a high-quality workforce and the ability to pursue newer economic opportunities. Regional infrastructure, like smart cities, can likewise be funded with higher taxation, attracting foreign investment.
Promoting democracy also has an effect on reducing wealth inequality. Highly unequal power allows wealthy and powerful rulers to further their agendas and protect their own interests, fossilising the economy. The CU project data confirms that Thailand is indeed run by an oligarchy – ie, the top 0.001 per cent. The higher the inequality, the more likely Thailand is to maintain an oligarchy and avoid democracy. Developing democratic and inclusive fiscal policies is thus important in reducing the oligarchy’s power and hence avoiding socio-political cleavages.
As a mid-term target, Thailand’s taxation should approach 26 per cent of GDP, the average for middle income countries. In the long term, the country should seek to reach an “ideal” income distribution by empowering the middle class and the poor. Venkat Venkatasubramanian of Columbia University has cited Norway as an example, with 90 per cent of the population obtaining 77 per cent of national income, demonstrating that the middle class and poor have higher economic output and power is more equitably distributed. This state of equality is fundamental for freedom, democracy, justice, and therefore socio-political harmony.
Higher taxation as a percentage of GDP ensures the state can care for its most vulnerable by investing in educational and health services as well as in regional infrastructure, all for the benefit of providing equitable opportunities. The combination of these factors will lift Thailand out of the middle-income trap and banish poverty. A Nordic bloc-style societal grand compromise between the state and the market to promote social democracy is required to achieve these aims.