This chapter discusses tax policy measures aimed at increasing tax revenues to finance social protection in Thailand. First, it analyses current tax revenues, discusses Thailand’s additional tax revenue potential and reviews tax policy measures that Thailand could put in place to broaden its tax bases. Second, it discusses tax policy measures to increase revenue while at the same time reducing inequality. Finally, the chapter presents the revenue potential from excise taxation, particularly health and environmental taxes.
Financing Social Protection through General Tax Revenues, Social Security Contributions and Formalisation in Thailand
Abstract
Thailand’s tax-to-GDP (gross domestic product) ratio is low, and the gap with peer countries has widened over time. In 2023, Thailand’s tax-to-GDP ratio (excluding social security contributions [SSC]) is 16.2%, significantly lower than the OECD average ratio (25% in 2022), and the Asia and the Pacific average ratio (17.7% in 2023) (Figure 2.1– Panel A). Since 2013 the tax-to-GDP ratio in Thailand has diverged from the OECD, HIC and Asian regional averages (Figure 2.1– Panel B).
Total tax revenue (excluding SSC) as a % of GDP
Note: Thailand’s peer countries were selected based on being upper-middle-income or high-income countries in Asia and the Pacific. The average for high-income countries is calculated based on 14 non-OECD countries. The tax-to-GDP ratios for Japan and the OECD average refer to data from 2022.
Source: OECD (2024[1]), Global Revenue Statistics Database, https://www.oecd.org/en/data/datasets/global-revenue-statistics-database.html.
Taxes are not buoyant in Thailand. Taxes are considered buoyant when tax revenues grow at the same or a higher rate than the GDP growth rate, leading to increased tax revenue and a higher tax-to-GDP ratio as a country develops. The lack of tax buoyancy explains the decreasing tax-to-GDP ratio in Thailand. While GDP grew at an annual rate of 3.5% in Thailand from 2012 to 2022, tax revenues grew at an annual rate of only 2.8% (Figure 2.2 – Panel A). The only buoyant taxes are the Value Added Tax (VAT) and other indirect taxes, including custom and import duties, taxes on specific services and taxes on the use of goods (Figure 2.2 – Panel B). Low tax buoyancy in Thailand can be explained by various factors, including the fact that economic growth is stimulated through generous tax incentives that cut the link between growth and tax revenue and that the enforcement of the tax system is not sufficiently effective in increasing tax revenues in line with economic growth. Because of the progressivity of the Personal Income Tax (PIT), the PIT is usually a buoyant tax, however not in Thailand, where various PIT exemptions and deductions undermine its role in the tax and benefit system (see Chapter 3). The Corporate Income Tax (CIT) is even less buoyant, which is suggestive of a need to better protect the CIT base.
Tax buoyancy, measured as tax revenue growth rates over GDP growth rates, 2012-22
Note: Annual growth rates correspond to the compound annual growth rate of nominal values between 2012 and 2022. GDP data uses current prices, and total tax revenues include SSC. The tax buoyancy values are calculated as the ratio of the annual growth rate of tax revenues by tax type to the annual growth rate of GDP (2012-22).
Source: OECD (2024[1]), Global Revenue Statistics Database, https://www.oecd.org/en/data/datasets/global-revenue-statistics-database.html; IMF (2024[2]), World Economic Outlook, https://www.imf.org/en/Publications/WEO/weo-database/2024/April.
Thailand collects almost three-quarters of its total tax revenue from CIT, VAT and excise taxes (Figure 2.3 – Panel A). The combined revenue of these three taxes is 70% of total tax revenue in 2023. Revenue from the CIT (4.3% of GDP in 2023) has been stable over time and is, on average, larger than the CIT revenue in OECD countries (Figure 2.3 – Panel B). Thailand collects less VAT revenue (3.9% of GDP) than OECD and upper-middle-income countries (UMIC) due to a low standard VAT rate and a relatively narrow VAT base. Excise tax revenues are higher in Thailand (3.6% of GDP) than in peer countries due to the long list of products subject to excise taxes and the high excise tax collection performance. However, the combined revenues from VAT and excise taxes (7.5% of GDP) are significantly lower in Thailand than in OECD countries, on average (8.9% of GDP). PIT and SSC revenues account for only 2.9% of Thailand’s GDP, well below the average of OECD countries (16.9% of GDP). High levels of informality and a large number of PIT deductions and allowances narrow the PIT and SSC base in Thailand. Property tax revenue in Thailand (0.4% of GDP) is significantly lower than that of the OECD on average (1.8% of GDP).
Tax revenue as a % of GDP
Note: The averages for UMIC, HIC, and East Asia and Pacific are calculated based on 32, 14, and 23 countries, respectively, as included in the OECD Global Revenue Statistics Database. All data are from 2023, except for Japan and OECD average (2022 data), and HIC and UMIC averages (2021 data).
Source: OECD (2024[1]), Global Revenue Statistics Database, https://www.oecd.org/en/data/datasets/global-revenue-statistics-database.html.
Significant additional tax revenue could be collected from VAT, PIT and SSC. Thailand raises more revenue from CIT, excise tax and other indirect taxes as a percentage of GDP than other UMICs (Table 2.1, Rows 1 and 2). However, Thailand has lower revenues as a percentage of GDP than most UMICs for SSC, PIT, VAT, and property taxes. An upper-bound estimate of the additional tax revenue potential by tax type is calculated as the absolute difference between tax revenue in Thailand and tax revenue in the top revenue-generating country of the UMIC group (Table 2.1, Row 3). Revenue estimates on concrete tax reform proposals from the literature are included in Table 2.A.1 in Annex 2.A.
Note: The first two rows indicate the tax-to-GDP ratios for Thailand and the UMIC average by tax type for 2021. The third row shows the distance between Thailand’s tax-to-GDP ratio and the highest-performing country in the UMIC group. The colours indicate how Thailand ranks among the UMICs for each tax. The quintiles, from the first to the fifth, are represented respectively by the following colours in order: red, dark orange, light orange (median quintile), light green and dark green. For example, dark green indicates that Thailand ranks in the top fifth of countries in the UMIC group in terms of tax revenue mobilisation (Row 1), resulting in a lower potential for additional tax revenue for the specific tax. On the contrary, red indicates that Thailand ranks in the bottom quintile in the UMIC group, and there is large, untapped revenue potential for additional tax revenue for the specific tax.
Source: Authors’ own elaboration based on OECD (2024[1]), Global Revenue Statistics Database, https://www.oecd.org/en/data/datasets/global-revenue-statistics-database.html.
VAT has high revenue potential
VAT raised 3.9% of GDP in Thailand in 2023. Although VAT is an important tax in Thailand’s tax mix, revenue from VAT falls short of its full tax revenue potential. Thailand’s approach of a low VAT rate and a relatively narrow base explains the low VAT revenues.
The VAT rate in Thailand is low, at 7%, compared to the rates of its regional peers (7-13%) and of the OECD on average (19.2%) (Figure 2.4). Although the statutory VAT rate in Thailand is 10%, the applicable rate has been reduced to 7% since 1992, with the exception of a brief increase during the Asian financial crisis (16 August 1997-31 March 1999). The return to the original rate of 10% has been postponed until September 2025. Recent reports have recommended that Thailand restore the 10% standard rate [e.g. World Bank (2023[3]), OECD (2023[4]), IMF (2024[5])]. The Thai Ministry of Finance has recently proposed increasing the VAT rate to 15%. However, raising the VAT rate in Thailand faces difficulties due to political and economic factors.
VAT exemptions narrow the tax base. Exemptions include agricultural products, basic unprocessed food products, newspapers and magazines, educational, cultural and liberal professional services and domestic transport (Box 2.1), many of which are not standard practice in OECD countries (OECD, 2022[6]). VAT-exempt products and services play an important role in the Thai economy. In fact, the World Bank estimates that the value added from VAT-exempt products and services accounts for about 19% of GDP (World Bank, 2023[3]).
VAT rates in %, 2022
Note: The Thai standard VAT rate in the Revenue Code is 10%, but it has been reduced to 7% since 1999 by a Royal Decree.
Source: Data adapted from OECD (2022[6]), Consumption Tax Trends 2022: VAT/GST and Excise, Core Design Features and Trends, https://doi.org/10.1787/6525a942-en.
According to the Thai Revenue Code Section 81, the following products and services are exempted from VAT:
Section 81 (1): Sales of goods and provisions of services as follows:
agricultural products (unprocessed), including e.g. white rice, fruits, vegetables, eggs, milk, etc.
alive or dead animals, including e.g. meat and fish
fertilisers
fish meal, animal feed
pharmaceutical or chemical products used on plants or animals
newspaper, magazines, school books
educational services of public and private educational institutions
cultural and art services
services in medical treatment, accounting, legal or other liberal professional services
medical services of health institutions
research or academic services
services of a library, museum or zoo
services under an employment contract
services for organising amateur sports
services by a public entertainer
domestic transport
international transport, excluding transport by aircraft or ship
rental of immovable property
service of local authority, excluding commercial services of local authority or service generating income or benefit, whether it is an infrastructure business or not
goods and services of a ministry that remits all revenue to the State without deducting expenses
goods and services for the benefit of religious and public charity in Thailand (non-profit)
goods and services described in Royal Decree No. 239.
Section 81 (2): Imports of the following goods are VAT-exempt:
imported goods under Revenue Code 81. (1) a)-f)
goods imported into customs-free zones, which are exempt from import duty
goods classified as import duty exempt
goods kept and returned by customs officials.
Section 81 (3): Export of goods or services by VAT registrant, which is required to pay VAT under Section 82/16.
Section 81/1: Small businesses with an annual turnover of less than THB 1.8 million (Thai baht) are exempt from VAT.
Royal Decree No. 239 B.E. 2534 (1991) exempts the following transactions from VAT:
special-purpose vehicles
goods and services traded within the Thai-Malaysia Joint Development Area
sales of assets of state enterprises
sale of diesel under a fuel trader
radio transmission services, air transportation, weather forecasting
cigarettes produced by a state organisation
government lottery
postal stamps, duty stamps or any other stamps
donations for government hospitals or schools.
Source: Thai Revenue Code; IBFD (2024[7]), Country Tax Guides.
To realise its VAT revenue potential, Thailand could increase the standard VAT rate and broaden the VAT base by reducing exemptions. Increasing the standard VAT rate may be politically difficult, but it is the most effective way to increase VAT revenues. Additionally, VAT exemptions for services in liberal professions and basic unprocessed food could be abolished. However, regarding the elimination of the exemption for basic unprocessed food, a compensation mechanism for the most vulnerable should be implemented, either through monthly cash transfers or the immediate reimbursement of VAT to eligible low-income consumers.
Recent studies have estimated that increasing the VAT rate from 7% to 10% and eliminating some of the VAT exemptions can increase VAT revenue by 2.4 percentage points of GDP (World Bank, 2023[3]). The increase in the VAT rate alone can raise an additional 1.5-1.8 percentage points of GDP in tax revenue, while the removal of VAT exemptions on general consumer goods and services can raise an additional 0.6 percentage points of GDP in tax revenue (World Bank, 2023[3]).
Thailand has taken the first steps to broaden the VAT base. For example, in 2021, Thailand brought digital services provided by foreign platform operators within the scope of the VAT (World Bank, 2023[3]). In less than a year, Thailand collected about 0.04% of GDP (THB 5.9 billion) in revenue from this base-broadening measure. Extending the VAT on e-commerce to all digital services provided by domestic and foreign businesses would raise +0.2% of GDP in additional tax revenue (World Bank, 2023[3]). In addition, in May 2024, the Thai prime minister announced the removal of VAT exemptions for low-value imported goods (below THB 1 500), which will now be taxed at the 7% VAT rate.
Tax administration reforms can reduce VAT evasion
VAT evasion results in a significant loss of tax revenue. The tax administration’s main concerns are VAT fraud from the use of false input invoices, under-reporting of sales, non-registration of businesses and false export declarations. The Revenue Department could strengthen the oversight and audit procedures for businesses with a high risk of non-compliance; use cross-verification systems to compare reported sales and purchases between suppliers and buyers; use data from e-commerce platforms to identify fraudulent taxpayers; and promote electronic invoicing to track transactions to increase VAT compliance.
A VAT compliance gap analysis can help identify the difference between the potential VAT revenue under full compliance and the actual VAT collected. The VAT gap provides an estimate of the VAT revenue lost due to non-compliance. This estimate can be approached either by a top-down approach using national accounts data or a bottom-up approach based primarily on audit data. Assessing the VAT compliance gap by firm size and sector can help to develop targeted policy interventions and reform strategies to enhance VAT efficiency and revenue performance.
The VAT registration threshold is high
Around 30% of the firms in Thailand are below the VAT registration threshold (Muthitacharoen, Wanichthaworn and Burong, 2021[8]). The VAT registration threshold in Thailand has been set at THB 1.8 million in annual turnover (approximately USD 51 000 [US dollars]) since 2005. The threshold is much higher in Thailand than in OECD countries when expressed as a multiple of GDP per capita (Figure 2.5). However, other peer countries in Asia have even higher VAT registration thresholds (e.g. Singapore, Malaysia, the Philippines and Indonesia). High VAT thresholds are likely to increase the degree of supply chain segmentation between VAT-registered and non-VAT-registered firms (Brockmeyer et al., 2024[9]). Non-registered firms also tend to have lower productivity than registered firms.
VAT registration threshold, measured in multiples of GDP per capita, 2022 or latest year
Note: The VAT registration threshold in Indonesia (IDR 4.8 billion [Indonesian rupiah]) is not displayed, as it is as high as 67 times the GDP per capita.
Source: Adapted from OECD (2022[6]), Consumption Tax Trends 2022: VAT/GST and Excise, Core Design Features and Trends, https://doi.org/10.1787/6525a942-en. Information on Colombia, Thailand, Singapore, Malaysia and the Philippines added from IBFD (2024[7]), Country Tax Guides.
Nonetheless, a significant number of firms below the threshold have opted for voluntary registration. Thai businesses with turnover below the VAT threshold can register voluntarily for VAT, which allows them to recover VAT on their inputs. As a result, they can price their goods or services more competitively and trade with larger VAT-registered firms, which typically require VAT compliance from their suppliers. About 40% of firms below the threshold voluntarily registered in 2014-17 (Muthitacharoen, Wanichthaworn and Burong, 2021[8]). De-registration is possible if the firm’s turnover drops below the VAT registration threshold in subsequent years. As many firms below the threshold register voluntarily, lowering the threshold may not meet with strong business opposition. However, it is important to ensure that the capacity of the tax administration allows it to audit a larger number of VAT-registered businesses.
Setting the right VAT threshold is a trade-off between minimising compliance and administrative costs for small and medium-sized enterprises (SMEs), protecting revenue and avoiding competitive distortions (OECD, 2022[6]). The main reason for not requiring SMEs to register for VAT is that the small amount of VAT revenue collected is disproportionate to the high administrative and compliance costs. The VAT threshold can act as a disincentive for businesses to grow or as an incentive to under-report and stay below the threshold. A relatively high threshold gives an advantage to small businesses while distorting competition with larger businesses. A lower threshold requires more capacity in the tax administration to audit and supervise a larger number of VAT-registered businesses. Determining the exact level of a VAT threshold is challenging and requires an in-depth analysis of microdata. If there is a presumptive tax regime to encourage formalisation, the VAT registration threshold would ideally be aligned with the eligibility threshold of this regime (see Chapter 4).
Revenue from the CIT amounted to 4.3% of Thailand’s GDP in 2023. Corporate profits and capital gains are taxed under the CIT at a rate of 20% in Thailand, which is lower than the average CIT rate in the East Asia and Pacific region (24%). SMEs1 benefit from reduced marginal CIT rates of 0% or 15%. Similar to a progressive PIT schedule, taxable profits up to THB 300 000 are taxed at a 0% rate; taxable profits between THB 300 000 and THB 3 million are taxed at a 15% rate; and profits above THB 3 million are taxed at the 20% standard rate.
Thailand can broaden its CIT base and collect more revenue. Thailand has a generous investment tax incentive regime (with many tax holidays), which lowers the effective tax rates for many domestic and foreign companies (OECD, 2025[10]; 2021[11]). Streamlining the generous and complex system of tax incentives could mobilise additional domestic revenues if tax incentives are redesigned in a way that manage to generate additional investment and economic growth that generates additional tax revenues. The Global Minimum Tax (GMT), in particular the Qualified Domestic Minimum Top-up Tax (QDMTT), could further strengthen the domestic corporate income base by ensuring that multinational enterprises (MNEs) pay a minimum tax on their excess profits. Box 2.2 discusses the costs and benefits of tax incentives, along with relevant empirical evidence on their efficiency and effectiveness
The potential benefits of investment tax incentives must be balanced against their costs. Tax incentives aim to stimulate investment that would not have taken place without an incentive (additional investment). If successful, tax incentives could increase investment, economic growth and revenue collection over time. However, if poorly designed, tax incentives can provide windfall gains to projects that do not require government support, cause market distortions or negative spillovers (including by “picking winners”), and potentially have high costs to the government in revenue foregone.
Empirical evidence indicates that expenditure-based tax incentives are more effective in achieving their objectives than profit-based incentives. Tax exemptions and reduced rates often provide firms with windfall gains, i.e. grant tax incentives for projects that would have occurred without the incentive (IMF-OECD-UN-World Bank, 2024[12]; OECD, forthcoming[13]; van Parys and James, 2010[14]; Klemm and Van Parys, 2012[15]). On the other hand, tax incentives that provide preferential tax treatment to expenditure (tax allowances and credits) are generally found to be more efficient at stimulating additional investment and more cost-effective than those that provide relief to income (House and Shapiro, 2008[16]; Zwick and Mahon, 2017[17]; Maffini, Xing and Devereux, 2019[18]; Ohrn, 2019[19]; Rodgers and Hambur, 2018[20]). There is evidence that tax incentives have a limited effect on investment in cases of policy uncertainty or other investment climate concerns (James, 2009[21]; Kinda, 2018[22]; Andersen, Kett and von Uexkull, 2017[23]; Ghazanchyan, Klemm and Zhou, 2018[24]).
Revising Thailand’s generous income-based corporate tax incentives could lead to significant domestic revenue mobilisation
Thailand’s investment tax incentive policy is targeted at specific activities, with tax holidays dominating the incentive regime (OECD, 2025[10]; 2021[11]). The Thai Revenue Department of the Ministry of Finance manages tax incentives. However, many investment tax incentives and special economic zones (SEZs) are administered by the Thai Board of Investment (BOI), beyond the control of the Ministry of Finance (BOI, 2025[25]). In order to ensure effective governance of tax incentive regimes, co-ordination between the respective institutions responsible for the design and administration of the tax incentives is essential. Thailand provides incentives based on both the type of business activity (activity-based tax incentives) and incentives based on other characteristics or “merits” of an investment project (merit-based tax incentives). High technology investment projects (Group A, according to BOI Announcement No. 9/2565 [2022]) benefit from tax holidays with a duration of 3-13 years, depending on the intensity of their use of high technology (BOI, 2023[26]). Thailand offers additional tax holidays of 1-5 years (in addition to the tax holidays granted under the activity-based incentives) for investment projects that focus on improving competitiveness, strengthening regional development and developing industrial zones (OECD, 2021[11]). Tax allowances include allowances for firms in 20 low-income provinces to promote decentralisation. There also exists a tax allowance for expenditures for transport, electricity and water supply, which doubles the available tax deduction for ten years (Announcement of the BOI No. 8/2565 [2022]). Figure 2.6 shows the number of promoted activities by sector and incentive scheme, with category A1+ incentives providing the longest tax holidays (10-13 years) and category B incentives being the least generous [as defined by the BOI (2025[25])]. In the absence of information on the actual investment projects that are supported, this figure provides an overview of the sectors to which most tax incentives are directed.
Number of promoted activities in the Investment Promotion Guide 2025, by sector and incentive scheme
Note: Activities in different industries are eligible for tax incentive schemes (A1+ to B) as defined by the BOI (2025[25]). The main difference between the different incentive schemes is the number of years of tax holidays. Activities under the A1+ incentives scheme (most generous) use high technology and benefit from 10-13 years of CIT exemption without being subject to an exemption cap. Activities under the B scheme (least generous) do not benefit from basic tax holidays but are eligible for additional tax holidays of 1-5 years under the merit-based incentive scheme.
Source: Adapted from OECD (2021[11]), OECD Investment Policy Reviews: Thailand, https://doi.org/10.1787/c4eeee1c-en and updated with data from BOI (2025[25]), Investment Promotion Guide 2025.
Thailand has additional special tax treatment for domestic and foreign companies in SEZs. A prominent Thai SEZ is the Eastern Economic Corridor, which targets firms with activities in science, technology, human resource development and research and development (R&D). Other special economic corridors (Northern Economic Corridor, Northeastern Economic Corridor, Central–Western Economic Corridor, and Southern Economic Corridor) have similar designs and focus on targeted industries, such as agro-food, bio-industries, tourism, digital and electronics (BOI, 2023[26]). Firms located in these zones benefit from additional income-based tax incentives (partial or full income tax exemption) or expenditure-based tax allowances.
Income-based tax incentives can significantly reduce average effective tax rates. Figure 2.7 shows the average effective tax rates on R&D intangibles with and without taking into account the available income-based tax incentives in OECD countries and selected emerging economies, including Thailand. Without accounting for tax incentives, the forward-looking average effective tax rate in Thailand for a profitable investment project in an R&D intangible taxed under the standard tax system is 17.5%, which is only slightly lower than the statutory CIT rate of 20%. However, when income-based tax incentives are taken into account, the average effective tax rate drops significantly in many countries, including Thailand (Figure 2.7). For example, the effective tax rate for firms investing in R&D intangibles in Thailand is only 2.6% for qualified international business centres, 3.6% under the performance-based tax incentive scheme and 9.5% under the activity-based tax incentive scheme (OECD, 2024[27]).
With and without income-based tax incentives (IBTI) for R&D and innovation, 2023
Note: For Thailand, three income-based tax incentive regimes for R&D intangibles are displayed: THA 1 refers to the investment promotion incentives granted to eligible international business centres under Royal Decree No. 674 2561 (2018); THA 2 refers to the most generous merit-based tax incentive, and THA 3 refers to the most generous activity-based tax incentive as announced by the Board of Investment (BOI). The most generous regime is displayed for the other countries.
Source: OECD (2024[27]), “Effective tax rates for income-based tax incentives”, in Corporate Income Tax Rates Database, https://www.oecd.org/en/data/datasets/corporate-income-tax-rates-database.html.
Thailand does not publish an annual tax expenditures report. An annual tax expenditure report is essential to provide a comprehensive overview of all tax expenditures that apply to different tax bases and beneficiaries and, ideally, to assess how much revenue is foregone due to tax expenditures, including tax exemptions, tax allowances, tax deductions, tax credits and accelerated tax depreciation. The BOI publishes an annual guide on the available investment tax incentives (BOI, 2023[26]). Under the Fiscal Discipline Act, the Revenue Department must report on tax expenditures annually to the Ministry of Finance. However, the tax expenditure assessment is not published as part of the annual budget cycle and, therefore, cannot be used for public policy evaluation and transparency. To effectively inform tax policy, it is essential that this report includes information on the tax revenue foregone for each individual tax expenditure. In the longer term, the publication of a separate tax expenditure report could also include an assessment of whether selected tax expenditures achieve their objectives in relation to the costs incurred and an assessment of the distribution of tax revenue foregone across gross income deciles.
The long list of tax holidays suggests a large amount of tax revenue foregone. The BOI produces estimates of revenue foregone for corporate tax incentives for firms that file tax returns. However, these estimates are not published and exclude firms exempt from filing. Revenue foregone estimates are not produced for VAT tax expenditures. There is a particular need to quantify more precisely the revenue foregone from Thailand’s tax incentive schemes and to assess their effectiveness. Thailand is advised to streamline its multiple incentive schemes to improve targeting and minimise costs (IMF, 2019[28]).
Thailand has taken important steps towards international tax reforms
Thailand has taken important steps to implement the GMT. Through a co-ordinated set of interlocking rules, the GMT ensures that large MNEs – with annual global revenues greater than EUR 750 million (euros) – pay a minimum effective tax rate of 15% on their excess profits, wherever they operate globally. Where the MNE pays an effective tax rate below the minimum rate of 15%, a top-up tax is due to bring the effective tax rate up to the minimum rate. This top-up tax will either be paid in the jurisdiction where the profits are under-taxed or – if that jurisdiction does not implement the rules – in another jurisdiction that has implemented the GMT. In January 2025, Thailand implemented legislation on the three components of the GMT: a QDMTT, an Income Inclusion Rule (IIR), and an Undertaxed Profits Rule (UTPR).
The introduction of a top-up tax (QDMTT) has the potential to raise revenue. The OECD has worked closely with Thailand to support their estimates of the economic impact of the GMT, based on both aggregate and firm-level data analysis. These estimates suggest that introducing a QDMTT would raise significant tax revenue. This reflects the strong presence of in-scope MNEs in Thailand, many of which benefit from effective tax rates below 15% due to the range of tax incentives offered by Thailand.
A review of the impact of tax incentives, particularly in relation to under-taxed profits, could provide valuable policy insights. Tax and non-tax incentives remain an important tool for attracting investment in Thailand. While the implementation of a QDMTT will help ensure that Thailand does not lose top-up tax revenue to other implementing jurisdictions, the GMT provides an opportunity to review the current design of tax incentives and assess whether they are effective and efficient. The GMT is designed to reduce the pressure on jurisdictions to offer overly generous incentives to already profitable companies, such as broad-based tax exemptions that can grant windfall gains to investors and result in substantial tax revenue foregone. On the other hand, tax incentives that successfully attract real economic substance can remain effective under the GMT, as can certain other tax incentives (including those that create timing differences). The GMT applies to excess profits, determined after deducting the substance-based income exclusion (SBIE) from its jurisdictional income.2 Many of Thailand’s tax incentives have substance requirements, including minimum investment and employment thresholds. The firm-level analysis conducted by Thailand in collaboration with the OECD indicates that some in-scope MNEs have high levels of employment and investment in tangible assets in Thailand, which will allow them to continue to benefit from effective tax rates below 15%.
There may be some scope for a small increase in the dividend withholding tax. The dividend withholding tax rate on distributed profits in Thailand is 10%. Tax-resident individuals who receive dividends from a company incorporated in Thailand can choose to include the dividend income in their PIT return and receive a tax credit equal to one-quarter of the dividend income to be applied against their PIT liability. This option can appeal to taxpayers in lower income brackets under the PIT regime, as they can lower their total tax burden by opting for the tax credit. Alternatively, taxpayers can decide not to include the dividend income in their PIT return and not receive a tax credit. Consequently, dividend income is subject to a maximum withholding tax rate of 10%. Under this latter option, the effective tax rate on dividend income is the combined tax rate paid by the company (20% on profits) and the shareholder (10% on the dividend). This implies an effective tax rate of 28%3 on dividend income for individual residents in Thailand, which is low compared to other peer countries in Asia (Figure 2.8). This suggests there may be room for an increase in the dividend withholding tax. More in-depth microdata analysis is needed to assess the potential impact of such a reform.
Combined rates of CIT and dividend withholding tax
Note: The effective tax rate on dividend income for corporations is calculated as , where is the CIT rate and is the dividend withholding tax rate.
Source: OECD (2024[27]), Corporate Income Tax Rates Database, https://www.oecd.org/en/data/datasets/corporate-income-tax-rates-database.html.
Property taxes account for 0.4% of Thailand’s GDP, which is well below the OECD average (1.8% of GDP). Property taxes include recurrent taxes on immovable property, recurrent taxes on net wealth, and estate, inheritance and gift taxes. Property tax revenues account for as much as 3.3% of GDP in Korea and 2.7% in Japan, while the UMIC average is 0.5% of GDP (Figure 2.9). The recurrent property tax is a very stable source of tax revenue for local governments that creates little economic distortion. Simplification and digitalisation of the property tax system are key for sustainable revenue mobilisation and lower administrative costs in the long run. However, as social assistance programmes are financed by central government revenues, recurrent property tax collected at the local level does not directly impact the central social protection budget.
Thailand could raise an additional 0.1 to 0.3 percentage points of GDP in property tax revenue once the Lands and Buildings Tax reform is fully implemented (OECD, 2023[4]; World Bank, 2023[3]; ILO et al., 2022[29]). Thailand’s property tax system was reformed in 2019 with the introduction of the new Lands and Buildings Tax Act. Due to the coronavirus (COVID-19) pandemic, the implementation of the reform was delayed, and generous property tax discounts were provided (90% rate cuts in 2020 and 2021, 15% rate cuts in 2023). In addition, to improve the administration of property tax collection, the assessed value of immovable property needs to be updated regularly and linked to market values. Currently, Thailand only updates the property values every four years. Similarly, the cadastral system needs to be digitalised and updated regularly and systematically.
Property tax revenue as a % of GDP, 2023 or latest year
Note: The property tax-to-GDP ratios for Japan and the OECD average refer to data from 2022, the UMIC and HIC averages refer to data from 2021. Property taxes include recurrent taxes on immovable property, recurrent taxes on net wealth, estate, inheritance and gift taxes, among others (OECD Revenue Statistics classification).
Source: OECD (2024[1]), Global Revenue Statistics Database, https://www.oecd.org/en/data/datasets/global-revenue-statistics-database.html.
Inheritance, estate and gift taxes often raise little revenue but support the progressivity of the tax system. In Thailand, as in most OECD countries, revenue from inheritance, estate, and gift taxes is low (0.003% of GDP compared to 0.15% of GDP in OECD countries, on average). However, some countries, such as Japan and Korea, collect higher amounts of revenue from inheritance taxes – 0.5% and 0.7% of GDP, respectively (OECD, 2024[1]). Taxes on the transfer of wealth, such as inheritance and gift taxes, can be effective in reducing net wealth inequalities and increasing the progressivity of the overall tax system. Compared to other taxes on wealth, inheritance and gift taxes can be effective in reducing inequality without compromising economic efficiency (OECD, 2023[4]; 2021[30]).
Differences in inheritance and gift tax rates can create opportunities for arbitrage (OECD, 2023[4]; Siriprapanukul, 2014[31]). Thailand introduced inheritance and gift taxes in 2015, setting rates at 10% and 5%, respectively (Inheritance Tax Act B.E. 2558). Aligning the rates of inheritance and gift taxes can help achieve neutrality between wealth transfers during life and at death (OECD, 2023[4]). On the other hand, lower tax rates for gifts may induce wealthy households to give away part of their wealth earlier in time. This could result in the more productive use of these assets.
A relatively low inheritance tax rate (10%) in Thailand reconciles revenue, equity and efficiency objectives, in particular when the tax base is broad. Of OECD countries, 7 have flat inheritance tax rates like Thailand, while 15 countries have progressive inheritance tax rates (OECD, 2021[30]) (Figure 2.10). Thailand’s inheritance tax rate is flat at 10% (for all heirs, including siblings), but a reduced rate of 5% is granted to direct descendants and parents. Of OECD countries, only Italy has lower flat inheritance tax rates for children (4%) and siblings (6%) than Thailand. Among Asian peer countries, only Japan, Korea and Viet Nam have inheritance and gift taxes. While Japan and Korea levy progressive rates that range between 10% and 55%, Viet Nam has a flat inheritance tax rate and fully exempts spouses and descendants (IBFD, 2024[7]). The inheritance tax threshold of THB 100 million (approximately USD 3 million), above which inheritance tax is levied in Thailand, is extremely high compared to the exempt amounts that apply in OECD countries. Thailand could consider lowering the inheritance tax exemption threshold to broaden the base while maintaining its low rate.
Maximum statutory inheritance tax rates and applicable threshold (USD), donor’s children and siblings, 2020
Note: Applicable thresholds are reported in USD 2020. The plot does not display Japan (max. rate=55%, threshold=USD 5 956 474) and the United States (maximum rate=40%, threshold=USD 11 580 000).
Source: Adapted from OECD (2021[30]), Inheritance Taxation in OECD Countries, https://doi.org/10.1787/e2879a7d-en. The authors have added Thailand.
Excise taxes are levied on a wide range of products, particularly those harmful to public health and the environment. Thailand’s excise taxes mobilised 3.6% of GDP in revenue in 2023. Health excise taxes levied on alcohol, tobacco and beverages account for 45% of all excise tax revenue (Figure 2.11). Excise duties on petroleum products and motor vehicles together accounted for more than half of Thailand’s total excise tax revenue (about 2% of GDP) in 2022.
Excise tax revenue as a % of total excise tax revenue, 2022
Source: Data adapted from Thai Excise Department (2023[32]), Annual Report of the Excise Department for the Year 2022.
Thailand collects the highest share of health excise tax revenue (1.3% of GDP) compared to its Asian peers (Figure 2.12). Alcohol excise taxes are the largest source of health tax revenue in Thailand (0.8% of GDP). However, the revenue is lower than the economic and healthcare costs of alcohol consumption [0.97% of GDP due to premature death, 0.03% of GDP due to healthcare costs (Luangsinsiri et al., 2023[33]) and costs related to lower productivity]. Over the past decade, tobacco excise tax revenue has proven to be a stable source of revenue for Thailand, generating an average of 0.3% of GDP. However, this revenue remains below the estimated health, economic and social costs of tobacco consumption (ADB, 2022[34]). Thailand has introduced a tax on sugar-sweetened beverages (SSBs), which generates revenue of 0.15% of GDP.
Health excise tax revenue as a % of GDP in Asian countries, 2022 or latest year
Note: Malaysia has an SSB excise tax in force, but disaggregated revenue data from this tax is not publicly available. National data sources have been used for Thailand and the Philippines.
Source: Data adapted from OECD (2024[1]), Global Revenue Statistics Database, https://www.oecd.org/en/data/datasets/global-revenue-statistics-database.html, WHO (2023[35]), WHO report on the global tobacco epidemic, https://www.who.int/publications/i/item/9789240077164 , and national sources.
Excise tax rates on alcohol could be increased. Thailand has a mixed excise tax system for alcohol products. Ad valorem tax rates range from 0% for fruit wine and some liquors, 5% for grape wine, 10% for higher alcoholic spirits and 22% for beers. The specific tax varies between THB 150 and THB 1 000 per litre of alcohol. In 2024, the ad valorem excise tax rates on wine were reduced from 5% to 0% for fruit wine and from 10% to 5% for grape wine. Reducing tax rates on alcoholic beverages consumed mainly by tourists could lead to a decrease in health tax revenues if it does not lead to a significant increase in consumption, making such a measure inadvisable. Overall, there may be scope for increasing excise tax rates on alcohol in Thailand, particularly on spirits (Figure 2.13).
Thailand’s tobacco excise tax structure follows many World Health Organization (WHO) best practices (7/12) but could still be improved to reduce tobacco consumption (Table 2.2; Annex 2.B). In 2022, 19% of adults and 37% of males regularly used tobacco. Thailand closely follows the following WHO best practices: the tobacco tax mix relies predominantly mostly (75%) on excise taxes (Best Practice [BP] 2); the excise tax structure is mixed, with a greater reliance on the specific tobacco excise tax component (BP3); all traditional tobacco products are subject to a tobacco excise tax (BP4); the sales of new tobacco and nicotine products are banned (BP5) – despite this ban, illegal sales are increasing and calls for stronger tobacco control; the specific excise tax is levied on each stick of tobacco product (BP7); tobacco excise tax rates are mostly uniform, except for cigarettes, which are taxed with a two-tier ad valorem tax rate based on the retail price (BP9); and comprehensive sales regulations are in place to increase the effectiveness of tobacco taxes (BP12). However, the design of tobacco excise taxes also deviates from WHO’s good practice. First, cigarettes have not become less affordable over the period 2012‑22, despite an increase in the share of total indirect taxes as a percentage of the retail price of the most sold brand of cigarettes (over 80% in 2022) (BP1); the ad valorem excise tax is not levied on the observed retail price but on the retail price suggested by the manufacturer/importer (BP6), which is lower than the final retail price; tobacco products, which are subject to the same excise tax structure, have different statutory tax rates (BP8) – for example, roll-your-own cigarettes have a very low tax share (36% of the retail price of the most smoked tobacco product), which induces smokers to buy these cigarettes rather than reduce or quit smoking; the specific excise tax is not indexed for inflation (BP10); and there is no excise tax floor that would ensure that a minimum amount of tax is paid on the ad valorem component (BP11).
Tax share as % of the retail price of the most sold brand of beer and the most sold type of spirit, 2022
Note: The data displayed above are from 2022 and have not been updated to reflect the 2024 alcohol excise tax reform in Thailand. No data were available for Malaysia, Singapore or Viet Nam.
Source: WHO (2024[36]), Global Health Observatory, https://www.who.int/data/gho.
Note: See Annex 2.B for more information.
Source: OECD based on WHO (2021[37]), WHO Technical Manual on Tobacco Tax Policy and Administration, https://www.who.int/publications/i/item/9789240019188; WHO (2023[35]), WHO Report on the Global Tobacco Epidemic, 2023: Protect People from Tobacco Smoke, https://www.who.int/publications/i/item/9789240077164.
Thailand’s 2017 SSB excise tax reform has shown early signs of contributing to a reduction in sugar consumption. Obesity and overweight in adults and children is a major public health concern in Thailand, with 15% of the adult population being obese and 45% being overweight in 2022 (WHO, 2024[36]). The SSB tax reform, which will be fully implemented by 2025, aims to encourage individuals to adopt a healthy lifestyle. Prior to 2017, beverages were only subject to an ad valorem tax; since 2017, a specific tax based on sugar content has been introduced in addition to the ad valorem tax. The structure and rate of the SSB excise tax are such that the tax burden increases with the concentration of sugar in the beverage. The ad valorem tax applies to all SSBs, which reduces potential substitution effects, but the rate varies by type of beverage. The specific excise tax increases with sugar content, but beverages that contain less than 6 grams of sugar per 100 ml are taxed at a 0% rate. The initial revenue and consumption impact of the SSB tax reform has been positive. SSB tax revenues increased from THB 17 billion in 2017 to THB 25 billion in 2020, while the consumption of taxed SSBs decreased by 2.5% within the first year of the implementation of the tax, and the consumption of non-taxed SSBs decreased by 2% (Phulkerd et al., 2020[38]). In addition, manufacturers have reformulated their SSBs, reducing the average sugar content by 26% for energy drinks and by 18% for fruit juices (Excise Department of Thailand).
Thailand is considering introducing a tax based on salt content. The aim of a sodium excise tax is to encourage consumers to buy healthier products with lower sodium content and to encourage producers to reduce the salt content of their food products. In addition to the public health objective, the tax is also an additional source of health tax revenue for tax authorities. The introduction of a content-based sodium excise tax is feasible if the Food and Drug Administration confirms sufficient capacity, as its implementation and regulation are very similar to the SSB excise tax. The Ministry of Health and the Food and Drug Administration would jointly assess the salt content of each product. The progressive tax rates can be related to the amount of sodium per serving (e.g. per 100 grams), similar to the amount of sugar in SSBs. Currently, Colombia4 levies a similar excise tax on salt.
Thailand’s ETS carbon prices are currently low (OECD, 2023[4]). Carbon pricing refers to the overall price on greenhouse gas emissions to encompass not only explicit pricing from Emission Trading Systems (ETS) and carbon taxes5 but also fuel excise taxes (OECD, 2016[39]). The net effective carbon rate in Asia ranges between EUR -25 in Malaysia and EUR +26 in Korea per tonne of CO2 emissions in 2023 (OECD, 2024[40]). This estimate is not available for Thailand, but low ETS carbon prices and moderate fuel excise tax rates combined with fuel subsidies suggest that this indicator is relatively low. In 2015, Thailand started a voluntary pilot ETS in four carbon-intensive industries. From 2018 to 2020, the ETS platform was rolled out to nine industries (OECD, 2023[4]). However, the voluntary nature of the ETS with no stringent emission cap has implied that the carbon prices generated by the current system are low and, thus, not effective in reducing greenhouse gas emissions (Figure 2.14– Panel A).
Enhancing carbon pricing could significantly boost revenue in Thailand. By raising revenue, carbon pricing can strengthen countries’ efforts to improve domestic resource mobilisation. Revenues from carbon pricing could be used to provide targeted support to improve energy access and affordability, enhance social safety nets, and support other economic and social priorities (Marten and van Dender, 2019[41]).
Plans for mandatory carbon pricing under the ETS are currently underway. A draft law outlining the framework of a mandatory system was submitted to the cabinet for approval in 2023. When the new law comes into force, the private sector will be required to report greenhouse gas emissions to the government, with administrative penalties for failures to report (OECD, 2023[4]).
Note: Several OECD countries, including Japan, have a carbon tax on gasoline and diesel, which is added to the fuel excise tax. Singapore has a carbon tax on diesel (EUR 0.38 per tonne of CO2), and Japan has a carbon tax on gasoline (EUR 2.19 per tonne of CO2) and diesel (EUR 1.37 per tonne of CO2).
Source: Adapted from OECD (2023[4]), OECD Economic Surveys: Thailand 2023, https://doi.org/10.1787/4815cb4b-en, based on data from OECD Green Growth Indicators; US Department of Energy, Maps and Data - Fuels Taxes by Country; national sources; World Bank Carbon Pricing Dashboard; Thailand Greenhouse Gas Management Organisation, Thailand Excise Department, Carbon Market information.
During the energy crisis, Thailand introduced substantial tax cuts in fuel excise taxes, which have been removed recently, but diesel and liquified petroleum gas (LPG) prices continue to be subsidised. In response to increasing living costs and oil prices, the Ministry of Finance issued several oil excise tax rate cuts in 2022 (Excise Department, 2023[32]). For instance, the diesel excise tax for fuel was cut from THB 6 to THB 1.3 per litre in 2022 (World Bank, 2023[3]). These major fuel excise tax rate cuts were financed via the State Oil Fund (World Bank, 2023[3]). Although the excise tax rate cuts on diesel have been removed, the State Oil Fund continues to subsidise the price of diesel and LPG, which results in domestic prices for households and businesses below the price on the international oil market. Fossil fuel subsidies have been estimated to cost the government 0.6% of GDP in fiscal year 2024 (IMF, 2025[42]). In 2023, Thailand’s excise tax on fossil fuels expressed per tonne of CO2 increased but remained relatively low when compared to more advanced countries in the region, particularly for gasoline (Figure 2.14–Panel B).
Thailand is encouraged to gradually increase the recently introduced carbon tax
In 2025, Thailand introduced a carbon tax as part of the excise tax. In January 2025, the Thai government approved a carbon tax of THB 200 (approximately USD 5.88) per tonne of CO2, applicable to seven types of fuels (Reccessary, 2025[43]). This carbon tax will be integrated into the excise tax levied on oil products (including gasoline, gasohol, kerosene, jet fuel, diesel biodiesel, LPG and fuel oil) and is not expected to affect retail prices. While this measure does not currently increase effective carbon prices, it could facilitate gradual carbon price increases in the future.
Carbon taxes can be particularly effective revenue-raising instruments in countries with high levels of informality. Carbon taxes are generally harder to avoid than direct taxes on personal or corporate income. They can, therefore, be effective revenue-raising taxes in economies facing the challenge of high levels of informality. Furthermore, revenue from carbon pricing can be used to finance both climate change adaptation and support improvements in social safety nets. The latter is particularly relevant in countries where many citizens do not benefit from adequate social protection (OECD, 2021[44]). Therefore, the introduction of a carbon tax in Thailand could potentially become an important instrument not only to reduce CO2 emissions over time but also to raise revenue.
Thailand earmarks tax revenue for local authorities, health and old age funds, and public broadcasting services (Table 2.3). Local governments are generally financed through locally collected taxes and central government-earmarked revenue. Two major social protection funds are financed via earmarked revenue: the Thai Health Promotion Fund and the Elderly Fund. Surcharges are levied on top of existing excise taxes on alcohol and tobacco, and their revenue is fully earmarked for these two funds.
Source: IBFD (2024[7]), Country Tax Guides; Thai Revenue Code; Thai Excise Department (2023[32]), Annual Report of the Excise Department for the Year 2022.
The Thai State Fiscal and Financial Discipline Act of 2018 introduced limits to the amounts of public revenue that can be earmarked to safeguard the flexibility and efficiency of the public budget. In practice, this means that Thailand cannot introduce a “social” VAT (i.e. earmarking part of VAT revenues for social protection), introduce new surcharges or increase their rate, or allow other organisations or funds to benefit from earmarked revenues. There are, therefore, legal limits to further revenue earmarking. More generally, revenue earmarking has significant drawbacks as it leads to budget rigidity and fragmentation and could limit the reallocation of public funds. Nevertheless, it may be justified in certain contexts to ensure the political feasibility of reforms such as removing fossil fuel subsidies.
Thailand has a well-developed budget planning framework, budget strategy and budget management process (Blazey et al., 2021[45]). The National Strategy (20-year horizon, 2018-35) is translated into National Economic and Social Development Plans (5-year period) to guide the allocation of resources in the annual budget planning process. The Medium-Term Fiscal Framework (MTFF) and the Medium-Term Expenditure Framework (MTEF) are prepared on a three-year basis. The MTFF follows a top-down approach, while the MTEF follows a bottom-up approach. These are then reconciled during the annual budget preparation process in accordance with the applicable fiscal rules.
Population ageing has implications for Thailand’s expenditure and revenues. The median age of Thailand’s population is expected to rise from 40 to 49 years old by 2050 (UN, 2024[46]), putting pressure on public finances, as expenditures are expected to rise and revenues are expected to fall. The issue of population ageing is pressing as Thailand’s population is ageing at twice the rate of OECD countries (OECD/ERIA, 2025[47]). The challenge of rapid population ageing for Thailand’s public finances needs to be an integral part of long-term budget planning and incorporated into the MTFF, MTEF and the medium-term revenue strategy.
Spending on pensions, health and long-term care in Thailand is projected to increase significantly. The fiscal cost of public pension schemes (old age pension allowance, civil servant pension and Social Security Fund) is estimated to increase from 1.4% of GDP in 2017 to 2.7% of GDP in 2035 and to 5.6% of GDP in 2060. The public expenditure on health is estimated to increase from 3% of GDP in 2017 to 4% in 2035 and 5% in 2060 (IMF, 2019[28]).
In the absence of reforms, population ageing in Thailand is expected to reduce tax revenues, as a declining labour force leads to lower revenues from labour income taxes and SSC. In addition, there could be indirect effects on tax revenues through changes in growth and productivity levels. The impact of ageing on income growth will depend on the relative magnitudes of: declining employment-to-population ratios; rising capital per worker; and productivity growth, which in turn depends on the pace of innovation, technology adoption and human capital investments induced by ageing (Rouzet et al., 2019[48]). Thailand’s fast ageing population may make it more difficult to catch up in terms of technology and innovation (OECD/ERIA, 2025[47]). Thus, lower future growth and productivity levels could further reduce tax revenues in Thailand in the absence of reforms.
In this context, Thailand will need to increase tax revenues to finance additional spending needs associated with an ageing population. Many advanced economies have responded to demographic shifts by raising the retirement age, often indexed by linking it to life expectancy, or are in the process of doing so. An increase in the retirement age in Thailand could encourage labour participation and enhance revenue collection from labour taxation. In addition, efforts to increase formalisation could play an important role in broadening the PIT and SSC base. Investment in human capital is also essential to increase formal sector wages, which in turn contribute to higher tax revenues. Shifting the tax burden from labour income to other tax bases – such as property, inheritance and consumption taxes – could be among the measures to address the fiscal challenges of population ageing. Finally, increasing the taxation of capital income at the individual level could provide an additional source of revenue.
Analyse the impact of ageing on Thailand’s tax revenue and tax structure.
Increase VAT revenues
Increase the standard VAT rate and broaden the base by eliminating VAT exemptions while providing compensation to the most vulnerable.
Consider lowering the VAT registration threshold.
Strengthen the VAT on e-commerce.
Improve the design of CIT incentives
Avoid profit-based tax incentives.
Publish an annual tax expenditure report that includes estimates of tax revenue foregone on an item-by-item basis.
Include the distributional impact of tax expenditures in the tax expenditure report.
Carry out a cost-benefit analysis of the costliest tax incentives and evaluate whether they result in additional investment or rather provide a windfall gain to investment that would have taken place without the tax incentive.
Increase revenues while enhancing the overall progressivity of the tax system
Consider increasing the withholding tax rate on dividends.
Continue implementing the Land and Building Tax Act; regularly update property values to match them with market values; regularly update the cadastral system and digitalise the land mapping survey.
Improve excise tax design
Alcohol excise taxes: Increase tax rates.
Tobacco excise tax: Levy the ad valorem tax on the tax-inclusive final (observed) retail price; increase the tax share of roll-your-own tobacco; index the specific tobacco excise tax to inflation; and implement an excise tax floor.
SSB excise tax: Complete the implementation of the reform started in 2017.
Implement a sodium tax if the Food and Drug Administration confirms that it has the capacity to implement and enforce the tax.
Strengthen carbon pricing
Phase out diesel subsidies.
Make the Emissions Trading System mandatory.
Gradually increase the recently introduced carbon tax.
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[3] World Bank (2023), Thailand Public Revenue and Spending Assessment, June 2023: Promoting an Inclusive and Sustainable Future, World Bank Group Publishing, Washington DC, https://openknowledge.worldbank.org/entities/publication/69650541-253d-47b6-b257-104cf1ae9e26.
[50] World Bank (2022), Thailand Economic Monitor: Fiscal Policy for a Resilient and Equitable Future, International Bank for Reconstruction and Development / The World Bank, Washington DC, https://www.worldbank.org/en/country/thailand/publication/thailand-economic-monitor-fiscal-policy-for-a-resilient-and-equitable-future.
[17] Zwick, E. and J. Mahon (2017), “Tax policy and heterogeneous investment behavior”, American Economic Review, Vol. 107/1, pp. 217-48, https://www.aeaweb.org/articles?id=10.1257/aer.20140855.
Tax reform recommendations for Thailand in the literature have focused on VAT, PIT, property tax and environmental tax reforms. Table 2.A.1 summarises the reform options and cost estimates presented in recent reports by various international organisations on domestic revenue mobilisation in Thailand. The reform proposals focus on tax types where Thailand collects less revenue (as a percentage of GDP) than its peers (Annex Table 2.A.1).
Note: Data in this table have been collected in an extensive literature review and cover tax reform recommendations and cost estimates for Thailand. A focus has been on publications published in 2022-24.
Selected WHO tobacco tax policy best practices are:
BP1: Increase tobacco taxes significantly to reduce the affordability of tobacco products. To reduce affordability, tax increases need to result in nominal retail price increases that exceed the increase in nominal incomes (affordability).
BP2: Rely more on tobacco excise tax increases over other general indirect (and direct) taxes as they are most effective in raising both absolute and relative prices of tobacco products (type of taxes).
BP3: Rely more on specific tobacco taxes over ad valorem taxes, and in mixed tax structures, give more weight to the specific tax component than to the ad valorem tax component (tobacco excise tax structure).
BP4: Tax all traditional tobacco products (i.e. cigarettes, cigars, cigarillos, roll-your-own [RYO] tobacco) with a tobacco excise tax (taxable products).
BP5: Tax new and emerging tobacco and nicotine products (i.e. electronic nicotine delivery systems [ENDS], electronic non-nicotine delivery systems [ENNDS] and heated tobacco products [HTP]) with an excise tax when their sales are not banned (taxable products).
BP6: For ad valorem tax structures, set the retail price as the tax base rather than, for instance, the cost, insurance and freight (CIF) value or the producer price (tobacco excise tax base).
BP7: For specific excise taxes, clearly define the tax base (for cigarettes, cigars and bidis, it is the number of sticks; for other tobacco products, such as smokeless tobacco or RYO tobacco, it is the weight of tobacco) (tobacco excise tax base).
BP8: Tax all tobacco and nicotine products similarly (e.g. similar tax structure, similar tax rates) (tobacco excise tax rates).
BP9: Rely more on uniform excise tax rates over tiered rates (tobacco excise tax rates).
BP10: Adjust specific tobacco taxes for inflation and real income growth on a regular basis (prices are not decreased at times of deflation) (indexation).
BP11: Complement the ad valorem excise tax with an excise tax floor (e.g. a minimum excise tax, a minimum retail price) (excise tax floors).
BP12: Implement non-tax policies affecting price levels of tobacco products (e.g. sale restriction for single sticks of cigarettes, bans of promotional discounts for tobacco products, minimum number of cigarettes per pack) to support the effectiveness of tobacco tax policies (sale regulations that affect tobacco tax policy design).
Note: Thailand’s assessment is marked in bold for each best practice (BP).
Source: OECD based on WHO (2021[37]), WHO Technical Manual on Tobacco Tax Policy and Administration, https://www.who.int/publications/i/item/9789240019188; WHO (2023[35]), WHO Report on the Global Tobacco Epidemic, 2023: Protect People from Tobacco Smoke, https://www.who.int/publications/i/item/9789240077164.
← 1. The definition of SMEs is based on annual turnover (up to THB 30 million) and paid-up capital (up to THB 5 million).
← 2. The SBIE is computed as a fixed percentage of the MNE’s payroll and tangible assets located in the jurisdiction. Limiting the application of the minimum tax to the excess profits means that firms with substantial economic activity in a jurisdiction may continue to benefit from reduced tax rates in that jurisdiction without being subject to the full top-up tax.
← 3. The effective tax rate on dividend income for corporations is calculated as , where the CIT rate is 20% and the dividend withholding tax rate is 10% in Thailand.
← 4. Colombia has had an excise tax on salt since 2022 (introduced together with a fat and sugar excise tax), which applies to ultra-processed and packaged foods containing added salt, sugar and saturated fats (e.g. snacks, canned goods or sauces). The tax rate depends on the level of sodium in the product and increases with higher levels of sodium. It starts at 10% for products with sodium exceeding 1 mg per kcal and/or 300 mg per 100 grams. The tax rate is planned to increase over the coming years (15% in 2024, 20% in 2025).
← 5. An ETS can set a (non-fixed) cap on total greenhouse gas emissions, and emission permits can be traded. A carbon tax sets a fixed price per tonne of CO2 emitted.