The poor in Thailand pay relatively high taxes
That the poor in Thailand pay relatively high taxes is a bold statement. The misconception that the poor pay virtually no tax comes from the fact that many think of taxation only as income tax.
But there are many more taxes such as VAT (VAT in Thailand), excise and corporate tax. These last three taxes fall on everyone in Thailand, and make up the bulk of the Thai state's revenue.
In Thailand, only 3 million people pay income tax. That means that only 16 percent of the revenue of the Thai state comes from income tax, the rest comes from VAT and other indirect taxes. Thailand is an exception in this area. In most countries, including South-East Asia, government revenues from direct taxes and indirect taxes are roughly equal.
Percentage of total state income, by type of tax.
| Thailand | Netherlands (apart from premiums) | |
| income tax | 16 | 30 |
| VAT, corporate tax | 74 | 40 |
| other taxes | 10 | 30 |
Source: The Revenue Department, Thailand and Belastingdienst, Netherlands
In addition, over the past 5 years, income tax in Thailand has contributed less and less to total revenue and the rest more and more. The leveling effect of the income tax, already not that great, became less and less.
The daily paper Mathichon (July 26, 2013) gives on p. 5 a similar analysis. From this I get the following figures:
Percentage of income paid to the state, all taxes combined.
| one third of the lowest incomes | 18 |
| one third of middle incomes | 18.2 |
| one-third highest incomes | 27 |
(Other sources again speak of 16, 16, and 24 percent respectively, but the trend is clear)
Mathichon concludes that Thailand has an 'unfair' tax system because it weighs equally heavily on lower and middle incomes. More money should come from the middle and upper incomes, ie income tax should be increased or the tax base should be broadened, while other taxes can be reduced proportionately. A higher VAT than 7 percent on luxury and harmful goods and services would also help.
The revenue of the Thai state is only 16-18 percent of the gross national income. (In the Netherlands this is 45 percent, which includes national insurance contributions). For a middle-income country like Thailand, with many ambitions for the future, that percentage is insufficient to set up and maintain good public facilities such as infrastructure, health care and the environment.
And then we are not even talking about a necessary and proper old-age provision. To realize such ambitions, the Thai state needs 30-35 percent of the gross national income. Doing this through loans alone (see the 2 trillion baht for upcoming new infrastructure) is not a lasting solution. The tax burden in Thailand will have to be increased.
Illustration: 'Hunting and gathering is getting boring for me. Let's taxes and invent government.'
In general, you see the share of income tax in state income increasing as a country becomes more developed. Other taxes such as excise and VAT, as well as import duties, are easier to collect than income tax. You see, for example, that low-developed countries apply very high import duties. For example, Thailand only gets about 5% of its tax revenue from import duties, while that is still 20% in neighboring Cambodia and a few years ago even more than 40%! This shift is now being accelerated by the many free trade agreements that are being concluded, as a result of which the revenue from import duties continues to decline.
I am surprised to see this article again. I really wonder if this is a subject that should be discussed among Dutch people. Ladies and gentlemen, we are guests in Thailand at all times and it would be much better to worry about the wells and woes of Dutch people living in Thailand or the annual holiday bulk who stay here for a few weeks. Think of fun places to go out, daily life, the problems you can experience, etc. etc.
Here we go again… having to have an opinion about everything and always. Personally, that suits me.
@ Gerard Bos v. Hohenf Thailand blog informs about Thailand, in breadth and length, and about all aspects of the country. That is why we publish, for example, the News from Thailand section. No topic is taboo with us. Tino Kuis has written an informative background story about the tax burden in Thailand. If that story doesn't interest you, don't read it. Then you should limit yourself to stories about – I quote you – 'nice places to go out, everyday life, the problems you can experience'. Well, there are plenty of them on Thailandblog. You can choose from 5.560 stories, so you're still busy for a while.
I completely agree with you, I find this information from Tino Kuis and other background stories about the Thai government, population, culture, etc. etc. very interesting! Let Gerard Bos enjoy reading what interests him, but do not determine which topics will or will not appear on Thailandblog.nl.
I find the article very interesting knew nothing about taxes in Thailand. You should be able to talk about everything, including those kinds of things, and not just fun things. There are many people who want to live in Thailand, or who already live there. That way they become a little wiser. And those people know about going out in Pattaya or Bangkok.
Capital letters placed by editors, otherwise the moderator would have rejected your comment.
Dear Gerard Bos v. Hohenf.,
A guest is someone who is temporarily visiting somewhere. I have lived here for 15 years and my fate, and certainly the fate of my Thai son, is tied to the fate of Thailand. Anyone who loves Thailand should be concerned about that fate, which is why I'm writing about it.
Perhaps you should listen to my mother: "A guest and a fish only stay fresh for three days." And a Kiswahili proverb says, 'Kick your guest after three days'. A shovel to work the land, that is.
Totally agree and thanks for your piece. If someone lives here and participates, you can just put on paper what is happening here, think along and form an opinion about what is going on or even say what/how something could be improved. Even for a "tourist" as I only spend a few weeks in Thailand with my Thai partner, I feel connected to the country and am therefore interested in all kinds of aspects of the country (culture, politics, history, economy, ….) . And even I can form an opinion on that, I think. Even if that image turns out to be too one-sided because, according to someone else, I miss certain perspectives or experiences for reasons such as “you don't spend enough time in Thai society” or “you are treated differently from the average Thai…”.
By the way, I read nothing in your piece about a pedantic finger or something that Thailand (or the Netherlands) is doing so badly. A reader can of course draw such a conclusion: “oh, we Dutch are getting caught again with our high income tax” or “those Thai people really pay little, too crazy for words”.
I think it's a nice setup, of course there are comments why no comparison has been made with the immediate neighboring countries. A reader from the Netherlands will quickly wonder how it "developed" (and that is not meant negatively towards Thailand, the fact is that they do not have certain systems such as a more extensive social security network as in the Netherlands, among others) The Netherlands in terms of situation contrasts with the region in and around Thailand.
On the basis of this you can then think of how a country can develop further, how an average inhabitant (Thai) can improve things socio-economically. Then you can start thinking about better education, higher productivity and so on. And how all this can improve the (socio)economic status of an average Thai.
I thought it was a nice piece, just pieces about travel and cafes are not my thing. Also nice, but actually pieces like this are a lot more fun because that way I get to know the second country I feel connected to better. Fantastic anyway. So, thank you!
As a guest in Thailand should I limit myself to the ups and downs of the Dutch? And close my eyes, ears, heart and head to the real Thailand? A good guest genuinely sympathizes with the host country. Editorials continue with information about the real Thailand. There will always be (many) people who have to have an opinion everywhere and always about people who have an opinion… How paradoxical do you want it to be? The fact that people choke on this paradox is logical and indeed leads to unwanted movements of the larynx. So understanding for that.
Dear Gerald
I am surprised at your comment. In my opinion, a 'guest' is someone who visits for a short or longer period of time and then leaves again. Or do you sometimes want to claim that your guests father children in your household and take care of them, pay the bill (tax), do chores in your house (work), etc.
If you are so curious about nightlife, then you would do well to buy a travel guide, and if you dislike people who express their opinion, then you can set a good example by stopping yourself. Or do you believe that your post written above is not an opinion?
Find it an extremely interesting article / topic because knew nothing or little about the Thai tax system.
It is something different from those eternally sluggish subjects such as those temples and Buddha statues, those oh so beautiful green rice fields, the delicious cuisine and of course not to forget the alleged smile.
Moreover, I have absolutely no need to worry about the ups and downs of compatriots living in Thailand or the many tourists who visit the aforementioned country.
What is it if you are a guest somewhere and should not really have an opinion about certain aspects that the host country uses?
You regularly come across it as a clincher 'yes, but it is their country, we are guests here in Thailand', so we should not comment on it. Besides that, should the Thai residing in the Netherlands keep their mouths shut in that context? 🙁
Don't easily use that other well-known cliché 'pink glasses wearer' for someone, but I'm happy to make an exception...
Warren Buffet (one of the richest men in the world) has publicly questioned before a US Senate committee why, as the richest man in the world, he pays LESS taxes than his secretary (who apparently earns $60.000 a year) .
The gap between rich and poor in Thailand is very large and anyone with any historical and economic awareness knows (should know) that this is a “recipe for disaster”. Taxation is a means for governments to narrow that gap, or to use it to provide the poor with better services (without actually making them richer, but healthier and more satisfied). The consequences of this (positive or negative) will have a major impact on Thai society and will therefore also affect the Dutch who are here as tourists or expats.
Not only in Thailand, Hans. If a Dutchman can get out of taxes, he will 😉
What also plays a role in Thailand with the lower incomes is that there is a huge black economy. It is almost impossible for a government to get behind this. All kinds of jobs that are paid black, but also all kinds of small businesses that go cash and are therefore invisible to the government.
IMHO this article is therefore going in the wrong direction. If you want to level up you have to take a different approach. Most people don't pay taxes because they don't earn enough (lower limit 150,000 baht) so if the salaries would increase and you can get more people in that group you can also raise more taxes.
The top group pays 37% tax, which is not unreasonable in itself.
My reaction wasn't finished yet but went to post anyway, probably clicked wrong.
If you get more people in the tax group with a higher income, it will also become less interesting to work undeclared. You also withdraw money from commercial institutions, by means of higher wages. If you want to give them an advantage, you can also lower things like import duties. Product prices for luxury goods are extremely high in Thailand, so by lowering them you could relieve the entrepreneur a bit. It is also likely that sales will increase, which can lead to more net income.
Not easy, such a process will probably take (decades of) years.
The Thai can get the income tax paid back. Simple reason is 'take care the parents'
This can simply be done via the internet.
They also pay taxes, but then immediately benefit from, for example, train travel, grand palace, buses and, for example, Siam ocean world and all other activities.
I don't believe that VAT is paid in the many markets in Thailand.
the same goes for the many stalls along the roads and streets.
On the other hand, foreigners who live permanently in Thailand pay more
VAT than an average Thai, since these foreigners often buy their stuff in the supermarket and department stores.
The catch in this story, of course, is the word “relative”. The whole story is a bit short-sighted, because every tax system of any country can be explained in the way you want.
From a macro perspective, the figures may be correct, I have not checked them, but at a micro level, the poor do not pay more tax than rich people at all. The income is lower, so the spending of the poor group is lower and the VAT they pay – expressed in money – will also be considerably lower.
The list of three tax revenues is not correct for this story, in any case you should mention corporate tax separately, because “the poor” do not pay it, at least not directly.
Why on earth again a comparison with the Netherlands and why not with a country such as Ecuador or Nigeria, to name but a few. . In all cases, a comparison makes no sense. To quote the Netherlands again, is the distribution of the three tax groups so ideal? I would like to see those figures compared to other European countries. As far as Thailand is concerned, a comparison with neighboring ASEAN countries would be better.
Dear Gringo,
I totally agree with you that I could have done a better comparison with an Asean country. See link below for Malaysia.
http://www.bloomberg.com/news/2011-10-07/malaysia-s-2011-2012-budget-revenue-expenditure-table-.html
In that country, 20 (Thailand 16 percent) percent of the gross national product goes to the state, but, just like in Thailand, only 16 percent of revenue comes from income tax.
The payment for a product also includes the profit for the company and therefore also the corporation tax, which you also pay.
A medium-sized farmer pays taxes on his tractor, scooter, diesel, gasoline, fertilizer, insecticides and some other things. Surely 18 percent tax on an income of 6-10.000 weighs much heavier than 18 percent on an income of 20.000 baht per month? That's what I mean by relative.
Pasuk et all., Guns, Girls, Gambling, Ganja, Thailands illegal economy and public policy, Silkworm Books, 1998 state that between 8 and 13 percent of the Thai economy is illegal. This can be largely achieved above water.
I agree with another commenter that incomes in Thailand should gradually increase and then the tax base can be broadened.
If the Thai government wants to function properly, that government needs more income. It just won't work without it. If anyone has a good plan, I'd love to hear it.
Tino: The lowest income group pays 18% (or 16%), the middle group 18% (or 16%) and the highest group 27% (or 24%). The lowest and middle groups therefore pay an equal percentage of their income in taxes. The highest group pays more in percentage terms.
From a numerical point of view, the poor do not pay relatively much at all and the figures contradict the title of your piece. Your interpretation of the figures you give in a response to Gringo's response is very subjective and somewhat clashes with the numerical substantiation. Still, I much prefer to read your piece than another article about fun places to go out 😉
Maarten,
It depends on how you look at it. I don't think it's fair that middle incomes contribute as much to taxes as the poorest group. That is the subjective, underlying view. You can also argue about the numbers. The many websites I visited often gave varying numbers. But the trend is correct. Economics is more psychology than science.
What's so remarkable about it, Hans? Discussions about tax systems can be endless. There are no solutions in this post and the comments, but there are sometimes interesting points of view.
If you only have a nonsensical “joke” to tell, don't respond at all!
@Gringo
Perfect response. I agree wholeheartedly with you.
Thais with an annual income of up to 150.000 baht (about 12.500 baht per month) do not pay income tax. In the three construction companies that my wife leads (in Bangkok), this concerns about 70% of the 2000 employees. 30% only pay income tax. Of course everyone pays VAT through their purchases. However, if you only earn 12.000 baht per month or less, you can simply buy less than with a salary of 30.000 baht.
You can indeed get an income tax refund if you have to take care of other people such as parents or children. But if you only pay a little (I pay 7,5% tax on my income), you can only get back even less.
Incomes can only increase if the quality of the employees improves (and that requires better education; that renewal process has not even started yet and will take – in my estimation – about 10 years). In addition, labor productivity must increase. This is considerably lower in Thailand than in the other ASEAN countries, not to mention the Western world. In other words: the average Thai employee works far too many hours at a relatively low output. Or said and seen in another way: where you need 1 employee in another country, you certainly need 3 Thai.
My estimate is that the average income in the industrial sectors and in tourism (which are essential in the current Thai economy, due to their size and exports) will clearly increase in the coming years and that the jobs - in the absence of good Thai employees – many will be occupied by workers from the other ASEAN countries. This is in the interests of business and they govern parliament.
Graduates of a Thai university with a bachelor's degree in 'hospitality and tourism' are cooks, stewards or waitresses, for a (now legally set) minimum wage of 15.000 baht per month. During their studies, they are used to a spending pattern of (converted) 30.000 baht per month. Many of them cannot live independently with that spending pattern (let alone get married and start a family) and will have to rely on (extra) money from their parents for years to come.
Chris,
If incomes are to rise, labor productivity must rise, that is true. And for this, good vocational education in particular is essential, education in Thailand is too academically oriented, too little money and too little attention is paid to vocational education.
As for labor productivity in Thailand, it's not that bad compared to many other countries in Asia. It belongs to the top 30 percent in terms of food, textiles, clothing and electronics. See link below:
http://www.set.or.th/th/news/thailand_focus/files/20070913_Mr_Albert_G_Zeufack.pdf
But we chat, it was about taxes.
It's a bit of a worry, but I think most jobs wouldn't even exist if people hired staff who would work more efficiently. In other words, you also have to deal with enormous hidden unemployment.
Think of the average catering tent. When you enter a Thai disco, it already starts with parking. There is a figure in every parking space that gives instructions on how to park in a space, Unnecessary. Then someone whose only job is to take you to a table. There is a waitress on every 3 tables, could also be a lot more efficient, etc.
Go to the hairdresser. I always find it a nice experience, costs you 200 baht. Girl 1 wash your hair. Then the meistro himself will come and cut you. Then girl 2 washes your hair again and puts gel in it. Then comes girl 3 who then combs your hair. etc etc.
This way you can come up with 1000 more examples. Extend this to wasteful standards and you can't run your place like that, you would be bankrupt in no time. Wages need to be raised IMHO in Thailand, but if you want to put people to work more efficiently then you also need more employment opportunities, I now sometimes get the idea that it is the other way around, people are put to work haphazardly because there is still was at hand.
Also a good comment in terms of vocational education. What you also see in my opinion is that those who do have a good salary often have jobs that are very specialized, including in the engineering industry, etc. Those I know with such a job earn very well even by Western standards, only they would earn more with the same job in the west.
Dear Tino;
I don't quite understand your statement. Do you agree with the fact that “the rural [farmers]” pay too much tax or not!
Personally, I agree with Mr. Matichon that the distribution of the tax is a bit skewed. Look at the salary of one agent in BKK and what the farmer "turns".
Gr; William Scheveningen…
Editors: The discussion is blowing in all directions and has long ceased to be about the tax burden in Thailand. Please stick to the topic of the posting.
Why not just call it our annual contribution to the community.
'load – pressure', just the word makes me heavier :).
Incidentally, I would like to say that the economy is a lot better in Thailand than in the Netherlands. And precisely because the 'tax burden' is much lower. This contribution affects everything. The best money for the economy is the black money, which flows easily so that it strengthens the economy.
Governments have the obnoxious habit of wanting to regulate everything. The simple reason is that people want to 'mother', but precisely this works against their own entrepreneurship.