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Another populist setback may be looming

Lagging tax refunds for first-time car buyers puts government policies under the spotlight again

Thailand's low-income citizens have their burden and now it's the turn of the middle-class to bear the negative impact of political populism. Reports last week suggested that the Excise Department is running low on money to finance tax refunds for the "first-car" scheme. This is a different situation entirely from the government failing to pay farmers for their rice, of course, but it's another bad consequence of populism all the same.

The car buyers are in a better situation all round than the rice farmers. Owning a car is hardly a matter of life and death. Losing out on the tax refund you expected after buying a car won't cripple anyone financially. It is another thing entirely to be promised the best price for your farm produce, on which your family depends for daily sustenance, and then not get it. Regardless, even if the car buyers deserve less "sympathy", the government initiative that drew them into this monetary arrangement is still appalling.

The two populist programmes share several aspects in common. Financial and social analysts warned the government against both due to fiscal risk for the economy and the participants and the adverse effects of pampering the populace. The government insisted nevertheless that its intention was to help the less fortunate and the criticism was shunted aside.

Populism comes with a hefty price tag, however. While the rice price-pledging scheme has wreaked havoc on government coffers, farmers' budgets and Thai competitiveness in global exports, the first-car tax programme has rattled the domestic economy by limiting consumer spending power to just the auto sector. That the Excise Department is running out of money to refund car buyers is arguably a "lesser" impact of this controversial scheme.

The Saha Group, a consumer-product giant, has repeatedly complained that the tax-refund policy tempts people to forego other spending priorities in favour of buying a car, whether they really need one or not. Spending in sectors other than automobiles dropped significantly last year because, having made a major purchase, consumers avoided further outlays. And their car payments were at least Bt4,000 a month, another reason to scrimp in other areas.

The huge demand for vehicles resulting from the first-car policy was an "artificial demand", economists have said. Meanwhile many who claimed to be "first-car" buyers already owned cars but signed up with relatives' or friends' names.

The government insists that the rice scheme was necessary because the farmers were suffering due to low market prices, but what was the excuse for the first-car scheme? None of the reasons given were substantial. Making the first-car tax refund even more doubtful are figures showing that a large proportion of buyers live in cities where traffic and pollution are becoming more and more of a problem.

To say that the caretaker Yingluck Shinawatra administration has been expert in introducing populist measures flies in the face of the facts, which reveal that most of its populist policies have bred more trouble than social benefit. Apart from the rice and first-car programmes, the distribution of free computer tablets to schoolchildren has hit a snag in contractual problems with the tablets' Chinese makers. The Bt300 daily minimum wage drew criticism when the government first pushed for it, but this policy has been overshadowed by the controversies involving the other schemes.

Like other issues, the Pheu Thai Party's populist schemes have been sucked into the ongoing political maelstrom. Debate on their merits has been clouded by extreme prejudice. The day Thailand starts deliberating the pros and cons of populist policies without political bias may be the day we see light at the end of the tunnel.


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