Why is tax reform needed in Thailand?
The Thai authorities are faced with an important question: how to increase government revenue in order to ensure the country's transition from the category of a middle-income country to the category of a high-income country? This is one of the key questions asked by Fabrizio Zarcone, World Bank Manager for Thailand, in an exclusive interview with The Nation.
In his statements, Zarkone stressed the need to reform Thailand's tax system to increase government revenue and investment in the country's population. According to the World Bank report "Thailand Public Revenue and Spending Assessment - Promoting an Inclusive and Sustainable Future", currently only about 4 million Thais pay income tax, which is not enough to ensure the economic development of the country.
"We have to put in a lot of effort to expand the tax base," Zarkone said. He also stressed that structural reforms of the tax system could unlock Thailand's huge potential and the advantages of its private sector, which is the driving force behind growth. Despite the heavy burden that will fall on the new government, Zarkone believes that the implementation of these reforms will be justified.
Balance of income and expenses: the course for sustainable development
After massive spending on subsidies and stimulus during the Covid-19 pandemic, the World Bank report recommends focusing on balancing spending and revenue in Thailand's fiscal budget. However, this does not mean the complete abolition of all subsidies, according to Zarkone.
He suggests channeling subsidies to help vulnerable groups while other significant spending can be streamlined to enable Thailand to become a high-income country. Among the necessary expenses, Zarkone highlights education, social protection, healthcare and other investments in the development of human capital.
"When a country like Thailand reaches a high income level, it not only acquires a new status... it also takes on a greater responsibility towards its citizens. People deserve better living conditions, a better healthcare system and quality education to ensure long-term development countries. And this is only possible with increased spending," Zarkone said.
Innovative reforms to overcome challenges
Zarkone draws attention to the need for innovative reforms in the wake of the Covid-19 pandemic. He notes that Thailand has shown resilience in the face of the pandemic, but there is a conservative approach to implementing the necessary reforms that should be changed.
To achieve its goals and ensure economic growth, Thailand needs to develop a comprehensive plan for tax reforms, consider decentralizing tax collection, and support all additional spending based on tax revenues.
It is important to note that Thailand has always adhered to the principle of fiscal discipline and maintained a strong balance between expenditure and income. According to Zarkone, each item of these expenses should be analyzed and carefully thought out, and, if necessary, the necessary resources should be found to finance them.
