Deputy Finance Minister Pradit Phataraprasit has proposed high economic growth rate driven by private investment to better address the income gap rather than tax the rich to uplift the poor, but experts suggest a tax rise is unavoidable.
"Instead of talking about how to divide a cake, we should talk about how to make it bigger," said Pradit yesterday at the annual seminar hosted by the Fiscal Policy Office.
Pradit cited Singapore, Malaysia and Indonesia as examples of places where per capita income had grown faster than in Thailand in the past five years, as these countries were achieving higher economic growth than Thailand.
Singapore's per capita income is six times higher than Thailand's and the island state could double per capita growth in five years, said Pradit.
Pradit lamented political uncertainty and the government's lack of resources. He said fixed expenditure accounted for 80 per cent of annual expenditure and left few resources for investment. The trend is expected to continue. He suggested that the government has no choice but to draw the private sector into participating in infrastructure investment with the government under the publicprivate participation scheme.
The two sides and consumers could be in a winwin situation if the government acknowledges the positive role of private firms and rewards them for taking risk with investment, he said. At the same time, the government or regulators must not let private firms monopolise the market and take advantage of consumers.
Satit Rungkasiri, directorgeneral of the Fiscal Policy Office, said that high economic growth and a just tax system would solve the problem of widening income gap between the rich and the poor. The gap is 11.3 times among the richest and poorest groups.
He said that of the 9 million who file tax forms annually, only 2.3 million pay tax due to many exemptions.
He said countries that could provide adequate social welfare to citizens have a high tax rate. For example, the tax revenue in Scandinavian countries accounts for about 50 per cent of gross domestic product, while Thailand's is about 16 to 17 per cent of GDP.
Satit expected the State Council to send back a draft of the national pension fund to the Cabinet by the end of this month. The fund is designed to provide welfare for labourers working in the informal sector, such as farmers and taxi drivers, and it is part of the government effort to address the income gap.
Nipon Paopongsakorn, president of the Thailand Development Research Institute, shared Satit's view of expanding the tax base. "We should thank the red shirts who made everybody think about the need for more social welfare," he said, referring to the recent rallies and riots, which were purportedly aimed at demanding a more just society. For example, the business community is also talking about increasing the minimum wage, he said.
He argued that the government is giving excessive tax privileges to big firms but fully taxes small firms.
About 60 per cent of the labour force worked in informal sectors where they could not get adequate income, resulting in a weakening of the democratic system and lower economic growth, he noted.
If a large part of society gets adequate income and social welfare, they could also drive economic growth as higher income lead will lead to higher consumption, he said.