Political parties promised several populist pledges for the general election to entice voters, including a controversial 10,000-baht handout via digital wallets to those aged 16 and over; a hike in minimum daily wages to 600 baht; an increase of minimum monthly salaries for university graduates to 25,000 baht; debt suspension for farmers; an immediate cut in electricity tariffs; and a rise in the monthly allowance for people aged 60 and over to 3,000-5,000 baht, up from 600-1,000 baht.
Thailand Development Research Institute recently estimated at least 3 trillion baht would be required to fulfil 87 populist policies promised by nine political parties.
Many voters would like to know: where will this staggering amount of money to support these policies come from? Will the government have to borrow more, which is likely drive public debt sky-high? Are these policies worthwhile and necessary, and how will they affect the country's competitiveness in the short and long term? How will massive spending affect a bloated government budget and widen the fiscal deficit?
The most important questions for many voters are how will elected politicians generate income, and what is the likelihood of higher taxes to offset a massive spending blitz if politicians follow through on their campaign pledges?
BORROWING OR TAX HIKES?
Kobsak Pootrakool, chairman of the Federation of Thai Capital Market Organizations, said the two options for the new government are more borrowing or collecting more taxes to fund its short-term populist policies.
He said the new government's policies and regulations should factor in investor trust in the stock markets, as they want to see long-term policies that can attract more foreign funds, raising income for the Thai economy so the nation can become a production base for new industries.
"However, the new government could face certain limitations from fiscal policy that may undermine their ability to carry out their promises, as the fiscal rule requires that public debt should not exceed 60% of total GDP," said Mr Kobsak, also senior executive vice-president of Bangkok Bank.
"Surely we have reached the quota on the first tranche of borrowing, and there are also limitations on tax measures."
BEYOND LEVIES
Boosting state coffers through greater tax collection is not the only way to pay for higher spending to support campaign policies costing hundreds of billions of baht, said the Federation of Thai Industries (FTI).
Amid doubts over where the funds will come from, FTI chairman Kriengkrai Thiennukul suggested the new government focus on building new industries and businesses that are financially ready to pay taxes, regardless of the tax type or rate.
Mr Kriengkrai is referring to establishing more high-tech industries that will allow manufacturers to depend less on labourers while racking up more revenue.
Some 60-70% of businesses in the Thai manufacturing sector are labour-intensive, making it difficult for manufacturers to bolster their earnings, he said.
These companies are quite concerned about whether the new government will forge ahead with proposals to increase the daily minimum wage, said Mr Kriengkrai.
But if entrepreneurs use more technology, ranging from robots and automation systems to software for data analysis, they can expand their businesses and earn more revenue, he said.
Mr Kriengkrai acknowledged this will be an uphill task for the new government because it requires a long-term plan closely aligned to efforts to grow the Thai economy.
Greater tax collection seems the more likely method for authorities to earn higher revenue, he said.
"If higher taxation is chosen as the method to raise state funds, the new government must make sure it is done in a fair manner," said Mr Kriengkrai.
Political parties promised populist policies to help people deal with the cost of living, but he wants wants to know how the policies are going to be funded.
"Some parties gave a clear explanation, others did not," said Mr Kriengkrai.
Some parties said they would restructure the state budget to funnel more money towards their policies, according to media reports. He said this tactic could prove difficult because a huge amount of the budget is required for recurring expenses such as the salaries of government officials.
"This problem is similar to high household debt. Workers only glimpse at the income on their pay slips, but they have a limited amount to spend each month," said Mr Kriengkrai.
TAX REFORM NEEDED
Sanan Angubolkul, chairman of the Thai Chamber of Commerce, said the chamber recently organised forums to exchange ideas and opinions on various party policies to stimulate the economy, with many promised to be implemented immediately after a new government takes office.
However, the feasibility of these policies and the financial capability of the country should be considered to avoid negative impacts and burdens in the future, said Mr Sanan.
"Each political party proposed the existing budget be reallocated without increasing debt, reducing or reworking budgets for various government agencies," he said.
"Some parties proposed policies that require a large amount of stimulus funding, which requires seeking additional sources of cash beyond the existing budget."
Tax collection has been a reliable tool used by previous Thai governments to fund many ambitious projects.
At the chamber forum speakers agreed tax reform should be pursued to make laws clearer, eliminate redundant rules, and attract more business investment by increasing tax incentives for investing in targeted industries such as bio-, circular and green technologies and the environment.
Mr Sanan said it is necessary to expand the tax base of the country. Compared with our peer nations, he said Thailand has a low number of taxpayers so a mechanism is needed to attract taxpayers into the system that is accurate and clear, creates equality in tax payment among individuals with similar incomes, facilitates access to funding sources to support business expansion and recovery, and offers a modern tax refund system.
When the business sector grows, the government will be able to collect more taxes, said Mr Sanan.
REGISTERING LODGING
To bolster tax revenues, the government should legalise unregistered accommodations to include them in the tax system via registration according to the Hotel Act, said Thienprasit Chaiyapatranun, vice-president of Thai Hotels Association (THA).
A big gap exists in this sector as unregistered accommodations, whether shared houses, apartments or small lodges, were estimated to comprise 50% of total accommodation in Thailand in 2019, according to THA.
Some properties that want to register cannot because their property type does not match the hotel characteristics described in the Hotel Act, he said.
Mr Thienprasit said those properties face a lower tax burden than registered hotels, meaning the country loses out on tax benefits and legal hotels face unfair competition.
He said while tax collection is necessary, small independent operators still find it difficult to strengthen their balance sheet after the pandemic.
The land and building tax, which was partially reduced during the pandemic, might prove too high a barrier to surmount for small operators now that collection has returned to regular levels, said Mr Thienprasit.
He said the land and building tax is the biggest levy for hotels each year, which is due even if they are not operating or closed for renovation.
The tax rate is calculated based on land price and is revised annually, while the rate for small hotels or budget accommodations might not match their income rate, said Mr Thienprasit.
The government might need to consider whether it is more feasible to calculate the rate based on revenue instead, he said.
While some academics suggested raising the value-added tax rate of 7% for general goods and services to 10% to earn more income, hotel operators are not worried about such a move because any additional service costs would be passed on to customers, said Mr Thienprasit.
However, hotels could be indirectly affected if this policy makes people spend less than before, he said.
This is a point of concern and should be studied before implementation, said Mr Thienprasit.
BUDGET REALLOCATION
Financial resources are not a critical factor for a new government looking to kick-start an economic recovery because it can reallocate the remaining budget and seek new borrowing, which is the typical process in managing important projects, said Somchai Lertsutiwong, chief executive of Advanced Info Service.
He said solving chronic problems, implementing new projects as promised and accelerating economic recovery requires budget support.
The ability to locate funding to drive campaign policies is not a concern because a new government can rely on the tax system, reallocate the budget remaining from the previous year, or even seek a new source of credit, said Mr Somchai.
He said the government needs to manage all priority tasks appropriately and administer the budget effectively.
The new government should help improve the capability of small and medium-size enterprises by reducing their operational costs to pave the way for their long-term growth, said Mr Somchai.
The new government should also push medium-term development by restructuring economic engines to lead the economy towards sustainable growth, he said.
DIGITAL TRANSFORMATION
Suphachai Chearavanont, chairman of the Digital Council of Thailand, said Thailand is ready to embrace digital transformation.
Transforming Thailand's key sectors, in particular agriculture, should help add revenue for the country, said Mr Suphachai.
He said the country should establish an agro/food security hub focusing on food sustainability, enhancing the sector by implementing an agro-industry transformation that utilises technologies such as smart farming, food tech and digitalisation to improve cultivation practices and optimise supply chain systems.
In addition, Mr Suphachai said creating Thai brands on the global stage should be emphasised. This can be achieved by promoting digital technology adoption among 3,000-5,000 organisations, cooperatives and community enterprises.
He said Thai GDP ranks 26th globally, while in the digital competitiveness index the country was ranked 40th out of 63 nations last year.
In terms of telecom infrastructure, Thailand is ranked 15th globally.
Thailand's GDP per capita in 2022 was US$7,749 per year, ranked 84th globally.
Mr Suphachai said this suggests the country has better digital infrastructure than many other nations, but has not leveraged this digital capability to increase the country's GDP.
