Conflict, Legitimacy and Government Reform: Equitable Allocation of ...

Panel Discussion
tax rate of an indirect tax is regressive and the more government relies on
indirect taxes, the heavier tax burden will be borne by the poor.
Consequently, indirect taxation reduces the poor’s income even more or
increases inequality, implying that the poor subsidizes the rich through
taxation.
Thailand does not have other direct taxes used in foreign countries
as a supplementary measure to mitigate inequality or even though it has
some but they are underdeveloped. They include property tax,
inheritance tax, capital gain tax and interest income tax. Presently, the
withholding tax rate of the last one is only 15%, which is rather low
compared to other income taxes.
Table 5: Proportion of direct and indirect taxes in England,
Europe and Thailand in 2000s (%)
Country Direct taxes Indirect taxes Total
England 51.6 49.4 100.0
Europe (average) 50.0 50.0 100.0
Thailand 40.5 59.5 100.0
Source: OECD, Ministry of Finance
Most revenue of Thai government comes from indirect taxes (valueadded
tax, excise tax, oil tax, cigarette tax, liquor tax etc.). During late
1980s - late 1990s, the proportion of this revenue was as high as 80 per
cent of total tax revenue but presently this proportion came down to 60
per cent while in developed countries like OECD, the share of indirect
taxes is around 50 per cent (Table 5).
As mentioned above, indirect taxes are regressive, that is, the poor
bear a higher tax burden than the rich, thus increasing inequality. Thus,
in Thailand our taxation system is rather unfriendly to the poor and
contributes to exacerbation of inequality. Available relevant studies
support this conclusion (Medhi, 1975; Wiboonlak, 1983; Wit, 1977;
TDRI, 2003; Pichit, 1986; Duangmanee and associates, 2009; Hyun
Hwa Son, n.d.).
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