Thailand’s super rich may ultimately have to pay more in taxes to address the $45 billion in government borrowing during the coronavirus pandemic, World Bank economists said Thursday, as the country struggles to roll out vaccines to flatten the curve of its worst COVID-19 outbreak.
The kingdom, one of Asia’s least equal societies, is home to 52 billionaires, according to the Shanghai-based Hurun Rich List, the most in Southeast Asia, and outstripping Italy, Japan and Singapore.
Many have multiplied their fortunes during the pandemic — including Dhanin Chearavanont, Thailand’s richest man, with net worth of $18.1 billion on the 2021 Forbes list.
Conversely, millions of Thais have become unemployed — including an uncounted army of informal workers from tuk-tuk drivers to street vendors — while household debt has surged to 90% of gross domestic product.
Yet tax rates remain relatively low, including a 20% corporate tax — only Singapore and Brunei have a lower rate in Southeast Asia — while capital gains on asset sales go untaxed in Thailand.
With millions stricken by debt and the risk of new coronavirus variants compounding a stuttering vaccine rollout, the World Bank warned the government may be forced to go back to the banks for more cash to feed into the economy.
To plug the record borrowing authorities could turn to “high net worth individuals” once the course for recovery is set, said Kim Edwards, a World Bank senior economist, adding that some “generous deductions” could be reformed.
“Personal income tax collection is quite a way short of what it could be… tax compliance and potentially increasing top tax rate, increasing capital gains and property taxes,” could also be ways to eat into the deficit, he added, during a virtual press conference on the release of the bank’s semiannual report on the country’s economy.
Neighboring Malaysia has a 24% corporate tax rate, while the Philippines goes up to 30%.
“It is less clear why these tax reforms should not work in Thailand,” Birgit Hansl, the bank’s country manager for Thailand, told reporters.
Thailand’s business clans are deeply dependent on politics and make regular public donations to the monarchy often televised in great ceremony led by King Maha Vajiralongkorn, by many estimates the world’s richest monarch, with a private fortune valued at between $30 billion and $70 billion.
Tax increases for the rich in an economy dominated by monopolies are among the calls of pro-democracy protesters, whose rallies are again simmering as the economy tanks and sinks into a public health crisis.
In its "Thailand Economic Monitor - the Road to Recovery," the bank said Thailand’s economy could grow by 2.2% this year if it is able to swiftly batter back the virus that has killed 2,938 since April and led to 343,352 infections as the alpha and delta variants rip across the country.
Authorities have virtually locked down Bangkok and several other provinces, warning of a looming crisis at hospitals where ICU beds are now in short supply.
However, about 3.4 million people, or just 4.8%, of the nearly 70 million population, have been fully vaccinated, according to Thai health authorities.
If the virus continues to spread, the World Bank said the country’s growth could be reduced to a measly 1.2% this year, well below regional projections.
The country is trying to lure back vaccinated visitors, starting with the islands of Phuket and Samui, which reopened on Thursday as the country looks to resuscitate a key sector that accounted for around a fifth of GDP before the pandemic.
Thailand recorded 40 million tourist arrivals in 2019, but the expected number in 2021 has been lowered sharply from a previous forecast of 4 million to 5 million to just 600,000, the bank said.
The arch-royalist government of Prime Minister Prayuth Chan-ocha has pumped $45 billion into the economy to provide relief to the unemployed and stir spending with $15 billion about to be dispersed in coming weeks.
The report praised the government’s massive stimulus, which began in April of last year.
It forecast that a strong rebound in global demand will likely bring an export boom to Thailand, giving the government the ability to borrow further should it need to.
However, the latest outbreak has thrown a cloud over the recovery.
Vaccines are seen as the only way out of the pandemic, but the biggest risk is that vaccine progress “is not as fast as we hoped for,” Hansl said.