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The Criminal Court delivered a landmark verdict yesterday that marks a crucial step toward the restoration of the rule of law in this country. It found Khunying Pojaman Shinawatra, Bhanapot Damapong and Kanchana Honghern guilty of deliberately avoiding paying tax amounting to Bt546 million in a stock transfer in 1997. It was a shattering verdict that will dramatically change the course of Thai politics.

The court's ruling will not only set a high standard of ethical conduct for business people, investors, politicians and other powerful people, but it will also erase the common belief among Thais that the rich and powerful people in this country will never go to jail. The root of the problem in Thai society and Thai democracy is that the law is not applied to everybody. If one is rich and powerful, one is exempt from the law or equal treatment. This common belief will have to be destroyed if Thailand is to move forward as a country of law and order.

The court said the prosecution has proven beyond a reasonable doubt that the defendants committed a conspiracy to evade paying taxes. The ruling said Pojaman and Bhanapot made the share transfer in the stock market in order to avoid tax liabilities even though there was no real transaction. This stemmed from a transaction of the 4.5 million stocks of Shinawatra Computer and Communication, which later changed its name to Shin, between November 7-12 1997. The stocks actually belonged to Khunying Pojaman, but her household maid or nominee, Duangta Wongpakdee, held these stocks on her behalf. Kanchana instructed Duangta to transfer the stocks via the stock market to Bhanapot, Khunying Pojaman's stepbrother. Duangta's name emerged in the asset-concealment case in 2001 when Thaksin Shinawatra narrowly won the Constitution Court case and kept his premiership with his infamous defence that he had made an "honest mistake".

By transferring the stocks via the stock market, Bhanapot did not have to pay taxes, but rather only a Bt7.38 million brokerage fee. There was no underlying payment involved. According to Thai law, if one receives assets or an income, one must pay tax. Bhanapot admitted to the court that Pojaman gave the shares to him and the court ruled that this was no family gift. The ruling also addressed a key legal issue of whether the three defendants intentionally gave falsified statements to authorities in order to avoid tax liabilities.

The Office of the Attorney General filed the lawsuit against the three defendants on March 26 of last year. The Court held hearings for some 30 witnesses for the prosecution, including Sak Korsaengruang, spokesman of the now-defunct Assets Examination Committee (AEC) who chaired the AEC panel that probed the tax-evasion accusations, and former Finance Ministry permanent secretary Suparat Kawutkul. The three defendants denied the charges and almost 20 defence witnesses testified in the case.

The court finally sentenced Khunying Pojaman and Bhanapot to a total of three years in jail - two years for the charges relating to the conspiracy to tax evasion and one year for giving falsified statements. Kanchana faces two years in jail. All three defendants immediately placed bonds and plan to appeal within one month. This case will end up in the Supreme Court.

So, in a way, it is a long overdue ruling, which comes after a political crisis that has divided Thailand almost beyond repair between the pro- and anti-Thaksin camps. It will set a legal precedent on what is believed to be a rampant business practice of avoiding taxes. And it will set a strong political precedent regarding how politicians and their spouses and relatives should behave.

Although the ruling comes a bit late, we welcome the fact that controversies that have all but torn Thailand now at least have an arbitrator that everyone can listen to.

Interestingly, the court cited "moral" shortcomings in its ruling, saying Khunying Pojaman, while being Thailand's first lady, failed to act as a good example for society. Hopefully, this is the first step toward the real restoration of law and order and the rebuilding of a true, accountable democracy.