The Thailand Development Research Institute (TDRI) has proposed that the government raise the value-added tax (VAT) to finance welfare and subsidy schemes for the poor after finding that current outlays are insufficient to address income disparity.
The Prayut Chan-o-cha government has spent 400-500 billion baht for cash handouts and welfare for the poor since taking over in 2014, but state expenditure for national social assistance schemes is too small and not directed to those who are really in need, said Somchai Jitsuchon, research director for inclusive development at the TDRI.
Social expenditure for OECD countries averages 20% of GDP, but Thailand's is 7.8%, Mr Somchai said. The government needs to pump an additional 350 billion baht into its social budget to raise the ratio to 10%, he said.
To fund this amount, the government should slash the country's defence budget, let the private sector play a leading role in driving the economy to save on economic stimulus spending, and raise the VAT and taxes imposed on assets, Mr Somchai said.
If the poor are affected by a VAT hike, the government can direct incremental tax revenue at solving the problem, he said at a TDRI public seminar titled "People's Welfare, Poverty-Solving Measures and Fiscal Discipline".
Mr Somchai said a cash giveaway is the most effective way to reduce poverty, as witnessed by the Gini coefficient, an income inequality measure, of OECD countries. The figure for countries that give welfare and subsidies was 25% lower than those without welfare, and 19% of that decline was derived from cash handout measures.
Handouts have lower management costs than other assistance measures such as using welfare smartcards to buy products at Thong Fah Pracha Rat shops, he said, noting that it is undeniable that the measure is politically motivated, even as it helps the poor.
Although handouts empower the poor to better tailor solutions to their own problems, it does not tackle the root problems of structural inequality and poverty, he said.
Athiphat Muthitacharoen, an economics lecturer at Chulalongkorn University, said the government's social measures are superficial and done without systematic analysis, hurting fiscal discipline in the long run.
For instance, the excise tax refund scheme for first-time car buyers initiated by Yingluck Shinawatra's government incentivised people to run up more debt than their repayment ability and the higher debt accumulation has weakened the economy.
Mr Athiphat also criticised the government's VAT payback scheme for welfare smartcard holders as contradictory, as card holders' maximum income is set at 8,000 baht a month, while they need to spend about 10,000 baht a month to get the ceiling 500-baht VAT return.
The government is offering a 86.9-billion-baht splurge to low-income earners and the elderly in a bid to alleviate living costs and boost the economy.
Under the handout spree, the government offers a one-time payout of 500 baht to 11.4 million welfare smartcard holders, a one-off 1,000 baht in travel expenses for people aged 65 and older who are in need of medical treatment, and 400 baht per month during December 2018 to September 2019 to those aged 60 and older for home rental payments.
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