The March 24 election saw all political parties, with the hope of winning the hearts and minds of voters, making ambitious promises to turn Thailand into a welfare state. Some pledges were seen as plain populism, including cash handouts for having babies, an increase in the minimum wages for workers, debt suspension for farmers, as well as boosting allowances for old people.
Those policies, if actually implemented, are estimated to cost the state hundreds of billions of baht, not to mention the fact that that several were clearly pipe dreams.
Unfortunately, those parties rarely said how they will be able to find the money to finance their welfare and populist schemes and make them sustainable.
Only a few came up with ideas to generate more income for the country. Among them, a policy to turn Thailand into a tax haven like Singapore and Hong Kong sounded interesting and practical.
Thailand is well known among foreign tourists for its plentiful natural resources, and beautiful tourist destinations with a unique culture and history. If the country is promoted as a shopping paradise, it would attract many more tourists and generate huge additional income.
Last year, the number of foreign visitors hit 38 million but this is still far behind that of Hong Kong which recorded 65 million arrivals. The number of foreign tourists in Singapore also hit a high of 18 million last year, considered to be huge compared to the size of the country.
According to the Tourism and Sports Ministry, the average spending by foreign tourists in Thailand is about 5,400-6,000 baht per day. Of this, it is estimated that 1,200-1,500 baht goes on shopping.
If Thailand's import tax on luxury and brand-name products were lowered to be on the same level as Hong Kong and Singapore, the country could take the lead from both of them since Thailand has the potential to attract more tourists. Moreover, cutting import tariffs would encourage Thai consumers to shop at home instead of going abroad and that would help improve the current account balance of the country.
Each year, the country loses large amounts of money from Thai shoppers buying luxury goods overseas.
Thailand was almost turned into a tax and shopping paradise in 2016 when the Customs Department was poised to cut the 30% import tax (duty) on luxury goods and luxury brands sold in the country with the aim of making it the leading tourist destination for luxury goods shopping in Asia.
The department estimated that the measure would help lift tourist spending on shopping in Thailand by at least 15-20%, not to mention leading to a significant increase in tourist arrivals.
It's unfortunate that the plan was suspended because it lacked a concrete study about a comparison of the competitive advantages with other tax havens if it were to be implemented.
The new government, no matter which camp wins the coalition forming game, should dust off the plan since a huge budget will be needed to become a welfare state, as envisaged by political parties. Without increasing revenue, the plan will not go very far.
The new government should study the pros and cons of this policy proposal and explore how being a tax haven could boost Thailand's competitiveness.
