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Shelved land tax sorely needed public backing

By on Mar 13, 2015 in Property News

‘In this world nothing can be said to be certain, except death and taxes.

A view from a highrise shows Bangkok's skyline dotted with buildings of all sizes. The government's proposed land and property tax is facing widespread resistance. (Photo by Pattanapong Hirunard)

A view from a highrise shows Bangkok’s skyline dotted with buildings of all sizes. The government’s proposed land and property tax is facing widespread resistance. (Photo by Pattanapong Hirunard)

That’s an American ethos imprinted in the American psyche since the founding of their nation.

In Thailand things are vastly different, as we all know. For most people, business people particularly, the general attitude can be summed up thus: “Taxes be damned. We’ll cook the books and, if necessary, bribe our way out of it.”

Taxation has always been a socially and politically sensitive issue. So it was not surprising that the public rose up in anger upon hearing this week that the government planned to impose a land and property tax.

In fact, it is nothing new. The bill has been in the works for more than a decade. The issue was regarded as essential because homeowners pay no taxes on their residences and landowners pay next to nothing on their land.

This has led to uncontrolled accumulation of land by a small group of wealthy people, much of which is for purposes of speculation.

A few well-known families are known to possess obscenely massive landholdings, including for example the Siriwattanapakdi family of Beer Chang fame.

According to Prachachat newspaper, the family is said to own over 630,000 rai. That’s 1,008 sq km, an area greater than that of seven provinces, including Samut Prakan at 1,004 sq km.

The Chearavanont family of Charoen Pokphand fame, says the paper, comes in second at 200,000 rai or 320 sq km, not quite a province but comfortably beating a large number of national parks.

All this accumulation has gone on, and is still going on, while a great number of households lack access to land for sustenance.

The accumulation of land, for future development or speculation, is, I suspect, the real target of the proposed tax law. And if it’s true, that was a good thing.

Unfortunately, the Prayut government has decided to shelve this land and property tax following fierce public resistance.

Many hoped the progressive law would play a part in narrowing, if only just a tiny bit, the income disparities that have become a yawning gap. That chance has now gone.

Actually, the part about taxing idle landholdings is quite straightforward. But residences are also included in the proposed law and that means it gets complicated and emotional, particularly because it affects many middle- and lower middle-income people.

These people, most of whom are salaried wage earners, have dutifully paid income taxes and struggled to save to acquire decent housing for themselves and their families.

They have passively accepted the government handing out subsidies to farmers and other groups of disadvantaged people.

They have even grudgingly tolerated the government’s handouts to the rich and business owners in the form of tax cuts.

To miss out on handouts is one thing but to be hit with additional taxes is seen as an injustice and quite intolerable.

And that is why the proposed law has met such resistance, despite the fact that, in principle, it could be beneficial to society and democracy as a whole.

Academics who have studied the bill point out that it is not supposed to be a simple revenue-generating tool for the cash-strapped government.

It was designed primarily to relieve the central government’s burden in funding local development.

Revenues from land and property taxes are supposed to go into local administration coffers, earmarked for local development.

Had it not been shelved, it would have been a liberating tool for local administrations indeed. They would no longer have to rely so heavily on budgetary rations from the government in Bangkok.

Furthermore, they would not need to depend on patronage from their political representatives in parliament to extract development money from the central budget.

This would give local administrations the leverage needed to prevent interference and domination by politicians.

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Source: Bangkok Post – 13 March 2015  “Shelved land tax sorely needed public backing”

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