Wake up and ‘smell’ the boiling water
- 10 Jan 2019 at 04:30
- WRITER: WICHIT CHANTANUSORNSIRI
People queue up on Dec 13 for cash handouts from GSB's Nakhon Luang branch in Ayutthaya. The bank is one of three assigned to handle disbursement of the government's cash handouts. (Photo by Soonthorn Pongpao)
Despite the uncertain date of the long-awaited election, political parties have intensified their poll campaigns, offering tempting policies to attract voters. A quick look at the campaign pledges of the competing parties suggests they want to turn Thailand into a welfare state. That would be a tough task.
Unlike European countries that genuinely rank as welfare states with strong tax systems capable of generating enormous revenues for public use, Thailand is still a middle-income country with 14 million people subsisting at the low-income level. All past and present administrations have had political reasons for avoiding raising taxes or implementing tax reforms: They were scared of losing popularity.
Wichit Chantanusornsiri is a senior economics reporter, Bangkok Post.
The Land and Building Tax Act initiated by former finance minister Sommai Phasi is a good example of a reformist measure that was heavily watered down by the coup-installed National Legislative Assembly. We've also had an unbalanced budget for over 20 years and will continue to do so for at least another decade due to the onset of an ageing society.
The regime of Prime Minister Prayut Chan-o-cha has spent enormously on its populist Pracharath scheme. Obviously the underprivileged need help and the regime must maintain fiscal discipline so as not to drain its coffers. But we can't write off a budget crisis further down the road unless sufficient contingency plans are put in place.
The question is: Have we become the frog who doesn't realise he is being boiled alive until it is too late, due to the slowly-warming temperature of the water?
With the poll just weeks, or perhaps months, away -- it was tentatively scheduled for Feb 24 but has recently been delayed again -- political parties are starting to introduce their most expensive, budget-guzzling policies.
In the field of education, the Democrat Party has proposed giving subsidies to children from when they are born until they hit their eighth birthday. This would gobble up over 10 billion baht a year.
The party is also dangling schemes to guarantee farmers can command certain prices; for example, 10,000 baht minimum for a tonne of paddy. The minimum price for a kilogramme of palm oil, would, under the scheme, be 4 baht; 60 baht for 1kg of rubber; a minimum wage of 120,000 baht a year for labourers; and a flat-rate allowance for elderly people of 1,000 baht, instead of relying on a progressive rate.
The Democrats have also promised to raise the amount put on welfare cards to 800 baht, which would cost at least 100 billion baht a year.
The Bhumjaithai Party wants to relieve guarantors of the education fund and introduce a five-year debt moratorium for students. It has proposed free education for all, through an online system, and a profit-sharing system for farmers.
It remains unclear how much of a burden these policies will put on the state budget. The Future Forward Party's main selling point is its vow to release the country from a monopolistic economic system while also promoting the digital economy. It envisions public transportation for all, with the so-called Hyper Loop running at 1,000kph.
The Palang Pracharath Party (PPRP), a proxy of the Prayut regime, says it will stick to the regime's policies while creating a social security net, strengthening the grassroots base, restructuring the economy, and switching to a more people-centric form of governance.
The regime has already gone on a spending spree ahead of the poll, injecting huge funds into its packages for the poor, as well as improved welfare for retired officials. It shelled out nearly 40 billion baht on these before the end of 2018, including a one-time top-up of 500 baht for welfare card holders. It also allocated 1.86 billion baht to rubber farmers.
In the era of disruptive technology, change is not fast but it can be furious. But the country cannot cling to old practices for long; rather, it must implement real reform, especially of the tax system, to narrow the economic gap. Otherwise, we may end up like that boiled frog.