Rural Taxation in Thailand

Abstract

THE THAI ECONOMY has recorded impressive progress in the past decade. During the period from I958 to i962, the gross domestic product at constant prices grew at an average rate of 6.5 per cent per annum. From i962 to i968, this rate of growth accelerated to an average slightly above 8 per cent per annum. Despite this strong overall performance, there remain certain unsatisfactory aspects of the pattern of development. Perhaps foremost among these has been the degree to which economic gains have failed to find adequate reflection in the rural areas of the country. Sharp differences persist between the standards of living in rural and urban areas (most notably the metropolitan center of Bangkok-Thonburi).' In this article, the Thai system of taxing the agricultural sector is analyzed to isolate its effect on rural development. The first part describes the system of rural taxation; this is followed by an analysis of its effect on rural development; and the article concludes with a consideration of policy alternatives. Under the present system, the burden of taxation on the rural community in Thailand may be divided into three categories: a direct tax burden in the form of the local (land) development tax;2 a hidden tax burden in the form of the rice premium-an export tax on the main product of Thai agriculture;3 and a share of all other indirect taxes such as sales taxes and import duties. In the eyes of the farmer, the local development tax represents his major tax payment. The burden of this direct taxation is rather light; in i966 it was only about five baht4 per person