Reform Taxes To Reduce Wealth Gap in Thailand

The situation stemmed from conflicts with the neighboring country of Cambodia is a major issue as the country leaders and people in the entire country want peace.
Prime Minister Aphisit Wetchachiwa did the right thing to handle the issue through diplomatic channel to avert violence so that the people of the two countries will not be affected. Of course, the prime minister needs to be patient. He has to put up with pressure from the opposite side, which tried to provoke him for violent retaliations. We know well why Cambodia did that.
Although the external problems and conflicts remain and although there is a very high risk that the situation would worsen, the government is also required to solve problems inside the country as well. As a result, it is about time for the government to exert more efforts to create a balance in the country and to solve the problems in the country. This is because several problems in the country are still waiting to be solved. In particular, the government needs to make the long-term plan for the country and needs to try to reduce the wealth gap in the country.

Cause of Conflicts
It is very important for the government to try to tackle the cause of wealth gap, which became a cause of conflicts in the country now. In particular, the government must pay attention to the tax reform measures, which have been proposed by academics for sometime but the issue has later become quiet and faded from the public attention. The government should pay special attention to the proposed reform of assets and building taxes because of a finding by the Thailand Development Research Institute (TDRI) regarding to the wealth gap. The TDRI carried out a survey of wealth and assets of families based on groups of their income in 2006. The TRDI divided the people into five groups, each of 20 per cent.
The survey found that the group of the richest family, which is the top 20 per cent of the people, owns up to 69 per cent of assets in the country. The TDRI also found that the lowest group or the 20 per cent, who are the poorest, owns only 1 per cent of assets in the country. When the people are divided into ten groups in term of their wealth, the first ten per cent or the richest people have three-time more of assets than the second group. This showed that the country's wealth concentrates on only among ten per cent of the people.

Concentration of Wealth
According to information as of 11 June 2009, there are only some 70,000 bank accounts which have more than Bt10 million each. These 70,000 accounts constitute only 0.1 per cent of all bank accounts in the country but the money in these accounts constitute 42 per cent of the savings in the country. Normally, a person owns more than one bank account. Supposing an average person owns two bank accounts, it would mean the 42 per cent of the country's savings are owned by only 35,000 people. This indicates very high concentration rate of income. At the same time, there are only 11 families taking turn to own the top five stocks with highest values in the stock market.
Similar concentration of wealth also happened in land ownership. The people, who do not own land or own less than 10 rai of land, constitute 42 per cent of the people around the country, which is very high rate. Meanwhile, the people, who own more than 20 rai of land, constitutes up to 22.73 per cent of all people. All of these show that the wealth is owned by less than ten per cent of people in the country. And children of these families are often wed among the rich families. The gap of income of the 20 per cent richest people and the 20 per cent poorest people stands at 13 per cent compared to 3.4 per cent in Japan, 4.2 per cent in South Korea, 8.4 per cent in the United States and 12.2 per cent in China.
As a result, academics proposed a tax reform as a way-out for narrowing the wealth gap. Academics proposed that the government should increase rates of direct taxes to be higher than indirect taxes because Thailand collects more indirect taxes than direct taxes. Or 59.5 per cent of taxes are indirect taxes while 40.5 per cent are direct taxes.

Change in Tax Structure
Since the government depends more on indirect taxes, the tax burden weighs more on the poor than on the rich because the poor normally spend more than the rich. As a result, the poor pays more taxes than the rich when comparing their income ratio. And the government always realizes this fact but it paid too little attention to this issue. Or the government may lack courage to change the tax structure for fear that it would lose support from the leading class of the country.
However, since the government volunteered to represent all groups of people in the country, the government must dare to change the tax structure, which is the cause of the conflicts today. The people will remember the government's populist policies for a short while but any action to reduce the wealth gap in the society will go down in history and will be worth remembering for a long time.