This paper looks at the effects of taxes on income distribution in Thailand making use of the 2005 data from the Bureau of the Budget and other sources. We attempt to figure out if Thai tax system is pro poor or rich (i.e. progressive or regressive) among the various tax types on the five quintile income groups. This paper is used to ascertain which income group tend to pay more of their incomes as taxes. The paper also explores the relationship between tax incidence and poverty reduction on the one hand and indicators of access to education and health services and social outcomes on the other using simple measures of association. We conclude that based on the results of the tax system, the income distribution of Thai households became more equal on individual income tax, implying a gradual effort to bridge the income gap between the rich and the poor in Thailand. A pre-tax Gini coefficient of 0.3056 saw a marginal improvement, leading to a post-tax Gini coefficient of 0.2862 on post-tax (IIT), implying the situation on post-tax individual income shows an attempt by Thai government to have equality in individual incomes, and thereby bridging the income gaps. In general, the total post-tax coefficient ended at 0.3085 indicating, though efforts are being put in place by government to enhance the income situation of the poor, the effort according to our empirical results is marginal and have even worsened the income disparity situation by increasing income inequality to another level. The result confirms the distribution of income of Thai households became more unequal, and an indicative of a tax regime which is regressive at the end. We therefore make a number of policy recommendations on the ensuing situation.
Table of Contents
1. General Overview
2. Research Questions
2.1 Research Objectives
3. Methods for Calculating Tax Incidence
4. Empirical Results
4.1 Incomes Distribution by Income Classes
4.2 Expenditure by each income class in proportion
4.3 Distributional Effects of Taxes by income classes
4.4 Effective Tax Rate
4.5 Post-Tax Income Distribution
5. Policy Recommendations
Research Objectives and Core Themes
This research aims to analyze the distributive impact of the Thai tax system on different income groups using 2005 data, specifically examining whether the system is progressive or regressive and its subsequent effect on income inequality and poverty reduction.
- Analysis of income distribution across five quintile income groups in Thailand.
- Evaluation of tax incidence and effective tax rates for direct and indirect taxes.
- Determination of the relationship between the tax system and post-tax income equality.
- Formulation of policy recommendations to address income disparities and tax structure reforms.
Excerpt from the Book
4.1 Incomes Distribution by Income Classes
Household incomes can be categorized into five main income classes of a given population. In Thailand, the same has been done. Income is distributed among the lowest, low, middle, high and highest income groups with per monthly income. In this assignment, there is an estimated population of 15.8 million shared among the various quintile groups in equal proportion of 20% (i.e. 3,160,000). Table 1 below shows this distribution.
Table 1 above shows the quintile income distribution by households in Thailand. 8.16% of income (approximately 4,197 baht per month per household) is earned by the lowest 20% of the total household (15.8 million) whereas 41.48% of income distribution is earned by the top 20% of household income group with an approximate monthly income of 21,335 baht per month. This table suggests income distribution in Thailand is pro-rich with the rich controlling more than 79% (see variable 3, 4, and 5) of the total household income of 51, 434 baht per month of total monthly income.
Summary of Chapters
1. General Overview: Discusses the necessity of taxation for government revenue and the role of different tax types in either bridging or widening income gaps.
2. Research Questions: Outlines the core investigative focus regarding tax dominance, progressivity, and the incidence of the tax burden in Thailand.
2.1 Research Objectives: Defines the specific goals including determining the tax burden distribution and studying the effects on income equality.
3. Methods for Calculating Tax Incidence: Describes the methodology used to capture and allocate tax burdens based on 2005 data from the Bureau of the Budget.
4. Empirical Results: Presents the quantitative findings regarding income distribution, consumption patterns, and tax impacts across different income tiers.
4.1 Incomes Distribution by Income Classes: Analyzes the income shares held by different population quintiles.
4.2 Expenditure by each income class in proportion: Examines how different income classes allocate their earnings across various functional areas.
4.3 Distributional Effects of Taxes by income classes: Details the monetary burden of specific taxes on each income segment.
4.4 Effective Tax Rate: Evaluates the progressivity of the tax system by calculating the ratio of tax paid to total income.
4.5 Post-Tax Income Distribution: Assesses the change in Gini coefficients and income inequality after the application of various taxes.
5. Policy Recommendations: Proposes strategic reforms, such as reducing reliance on indirect taxes and increasing direct taxation, to improve income distribution.
Keywords
Tax System, Thailand, Progressivity, Regressive, Corporate Income Tax, VAT, Individual Income Tax, Income Distribution, Gini Coefficient, Tax Incidence, Poverty Reduction, Fiscal Policy, Income Inequality, Household Expenditure, Tax Reform.
Frequently Asked Questions
What is the primary focus of this research?
The research examines the effects of the Thai tax system on income distribution to determine whether it functions as a tool for poverty reduction or contributes to income inequality.
What are the central themes of the work?
Key themes include the distinction between direct and indirect taxes, the calculation of tax incidence, effective tax rates, and the analysis of pre-tax versus post-tax income equality.
What is the main research objective?
The primary objective is to identify which income groups bear the heaviest tax burden and to assess if the Thai tax system is progressive (pro-poor) or regressive (pro-rich).
Which methodology is employed in this study?
The study uses empirical analysis of 2005 tax data from the Bureau of the Budget, calculating effective tax rates and Gini coefficients to measure distributional impacts.
What topics are covered in the main section?
The main section covers income distribution patterns, consumption expenditure analysis, the distributional effects of specific tax types like VAT and corporate tax, and a comparison of effective tax rates.
Which keywords best describe this work?
Key terms include tax system, Thailand, progressivity, regressive, corporate income tax, VAT, individual income tax, and income inequality.
How does the tax system affect the middle-income group in Thailand?
According to the empirical results in the study, the middle-income group faced high effective tax rates (47.21%), suggesting that the tax system places a significant burden on this segment.
What is the author's final conclusion regarding the Thai tax system?
The author concludes that while there is an effort to use individual income tax to bridge gaps, the overall system remains regressive and has, in some aspects, worsened income inequality.
What policy changes does the author recommend?
The author recommends reducing reliance on indirect taxes, enhancing tax administration to improve individual income tax collection, and introducing taxes on wealth and property.
- Arbeit zitieren
- Joseph Ato Forson (Autor:in), 2013, Tax Incidence and Poverty Reduction: Assessing the Effects of Taxes on Income Distribution in Thailand, München, GRIN Verlag, https://www.hausarbeiten.de/document/212606
