Regulatory Reform in Thailand

5. Enforcement, inspections and compliance

Abstract

This chapter examines the enforcement of regulations in Thailand and how compliance is encouraged. Although Thailand has not yet included enforcement, inspections, and compliance into its better regulation toolkit this section makes recommendations on how to do so.

Introduction

Whilst the adoption and communication of a law set the framework for achieving a policy objective, effective implementation, regulatory compliance, and enforcement are essential to actually meeting that objective. An ex ante assessment of potential methods for achieving compliance is increasingly becoming part of the regulatory process in OECD countries.

The issue of proportionality in regulatory enforcement and inspections, linked to risk assessment, is also attracting growing attention. The aim is to ensure that resources for enforcement should be proportionately higher for those activities, actions or entities where the risks of regulatory failure are more damaging to society and the economy (and conversely, proportionately lower in situations assessed as lower risk) (OECD, 2014[1]).

Assessment

Despite awareness of good regulatory principles and the significant progress Thailand has made in implementing many of them, regulatory delivery – the way regulations are implemented, enforced, and compliance ensured – does not appear to be part of Thailand's “better regulation toolbox”.

This is understandable, as good regulatory practices have to be implemented gradually with respect to the administrative capacities in every country. In addition, regulatory delivery is the “youngest” regulatory policy discipline and often receives limited attention even in many OECD Members (OECD, 2014[1]).

In the future, to complete the Regulatory Policy Cycle and ensure regulations are complied with and therefore achieving their objectives, Thailand should consider developing an overarching, whole-of-government policy on regulatory delivery. This should include risk-based approaches to regulatory enforcement, better targeting and co-ordination of inspections, and promoting compliance, following the OECD Best Practice Principles (see Box 5.1).

Box 5.1. The OECD Best Practice Principles for Regulatory Policy: Regulatory Enforcement and Inspections

1. Evidence based enforcement. Regulatory enforcement and inspections should be evidence-based and measurement-based: deciding what to inspect and how should be grounded on data and evidence, and results should be evaluated regularly.

2. Selectivity. Promoting compliance and enforcing rules should be left to market forces, private sector and civil society actions wherever possible: inspections and enforcement cannot be everywhere and address everything, and there are many other ways to achieve regulations’ objectives.

3. Risk focus and proportionality. Enforcement needs to be risk-based and proportionate: the frequency of inspections and the resources employed should be proportional to the level of risk and enforcement actions should be aiming at reducing the actual risk posed by infractions.

4. Responsive regulation. Enforcement should be based on “responsive regulation” principles: inspection enforcement actions should be modulated depending on the profile and behaviour of specific businesses.

5. Long term vision. Governments should adopt policies on regulatory enforcement and inspections: clear objectives should be set and institutional mechanisms set up with clear objectives and a long-term road-map.

6. Co-ordination and consolidation. Inspection functions should be co-ordinated and, where needed, consolidated: less duplication and overlaps will ensure better use of public resources, minimise burden on regulated subjects, and maximise effectiveness.

7. Transparent governance. Governance structures and human resources policies for regulatory enforcement should support transparency, professionalism, and results-oriented management. Execution of regulatory enforcement should be independent from political influence, and compliance promotion efforts should be rewarded.

8. Information integration. Information and communication technologies should be used to maximise risk-focus, co-ordination and information-sharing – as well as optimal use of resources.

9. Clear and fair process. Governments should ensure clarity of rules and process for enforcement and inspections: coherent legislation to organise inspections and enforcement needs to be adopted and published, and clearly articulate rights and obligations of officials and of businesses.

10. Compliance promotion. Transparency and compliance should be promoted through the use of appropriate instruments such as guidance, toolkits and checklists.

11. Professionalism. Inspectors should be trained and managed to ensure professionalism, integrity, consistency and transparency: this requires substantial training focusing not only on technical but also on generic inspection skills, and official guidelines for inspectors to help ensure consistency and fairness.

Source: OECD (2014), Regulatory Enforcement and Inspections, OECD Best Practice Principles for Regulatory Policy, OECD Publishing, Paris, http://dx.doi.org/10.1787/9789264208117-en.

Compliance is not systematically measured and analysed

Compliance with laws and regulations in Thailand can vary widely depending on the sector, region, and specific laws in question. While frameworks exist to ensure regulatory compliance, the actual level of compliance can differ significantly. Large Thai corporations, especially those with international ties, tend to maintain a higher level of compliance with laws and regulations. As is the case in most parts of the world, these corporations often have dedicated legal teams to ensure adherence to local and international standards. Small and medium-sized enterprises may exhibit varying levels of compliance, often influenced by their resources and understanding of regulations.

While some areas, such as tax laws and major commercial regulations, are more strictly enforced, other areas may experience laxer or uneven enforcement. For example, environmental regulations, particularly in remote and rural areas, present significant challenges in enforcement, leading to increased deforestation and industrial pollution. The effectiveness and consistency of regulatory bodies may vary. International trade agreements and relationships can drive higher compliance levels in certain sectors, especially those involved in export and import activities.

There is no government-wide approach to systematically measuring and analysing compliance in Thailand. Each agency responsible for enforcing regulations has the competence to measure compliance, but such measurement is not systematically carried out even at the level of individual agencies. Where such analysis is conducted, the results are not always communicated to the ministry responsible for the given regulation, which limits the ability to inform the regulatory review process.

Whenever an ex post review of regulation is carried out, ministries and government agencies must analyse reasons for non-compliance and provide an explanation in order to repeal or revise the regulation.

Promoting public awareness and engaging the community in the regulatory processes can enhance compliance and support enforcement efforts by allowing stakeholders to be involved in the policymaking process and have their concerns and suggestions heard and incorporated. However, no specific actions are currently taken to increase compliance levels through, for example, information campaigns (see the example of Slovenia in Box 5.2).

Box 5.2. The Use of Public Campaign Compliance Initiatives in Slovenia

The public campaign “Let´s stop undeclared work” – aimed at preventing undeclared work – was launched on 31 August 2010 by the Ministry of Labour, Family and Social Affairs, in co-operation with the relevant supervisory authorities and with the support of the social partners.

The campaign was aimed at the general public, especially enterprises, workers and consumers, and set out to:

• inform people about the benefits of paying taxes and to emphasise the fact that social security contributions provide social security,

• raise awareness regarding the negative effects for the consumers (i.e. no invoice = no warranty);

• promote a positive image of compliance with employment and social security regulation and to emphasise the importance and purpose of the payment of social security contributions and the payment of taxes.

• underline the negative effects of undeclared work that leads to unfair market competition: business entities that are operating in accordance with the regulations are disadvantaged as they cannot compete with those engaged in undeclared work.

Posters and leaflets aimed at the general public were available at all regional offices of the Employment Service of Slovenia, at social work centres, local administrative units, at the tax office. They were distributed also through the offices of all social partners participating in the campaign. Promotional materials were available also at various trade fair activities organised by these institutions. Promotional materials were posted on the state administration, supervisory authorities and e-government websites. Ads were published in various magazines aimed at entrepreneurs and craftsmen as well as on the radio. The campaign more precisely included the following promotional materials:

• print of hoardings and rental of poster sites at 60 different locations;

• print and distribution of leaflets in the range of 30 000 pieces;

• print and distribution of B2 size posters in the range of 700 pieces;

• production and release of radio ads on radio stations VAL 202 and Radio Centre (ads were playing for one week);

• http://www.protisiviekonomiji.si/fileadmin/template/vklopi_razum/images/slider/slider.jpg.

• publication of ads in the journal Craftsman (Obrtnik), Entrepreneur (Podjetnik), in the gazette of Slovenian Chamber of Commerce;

• publication of campaign banners and logos on the websites of ministries, supervisory authorities, and participant institutions.

In February 2015 the Government decided to launch a public campaign “Activate your mind – Request an invoice!”, aimed at raising public awareness of the negative impacts of the informal economy. In addition to promotional activities in the form of posters, leaflets, radio and TV advertising, a website http://www.protisiviekonomiji.si/ was created.

Citizens can use web application to scan received invoice and send it to the financial administration. On the website names of citizens receiving a prize of 15 000 euros are published. Promotional video: https://www.youtube.com/watch?v=7AQABkKSqao

Source: Responses to the Slovenia Regulatory Policy Review Survey.

Lack of focus on regulatory enforcement

Effective regulatory enforcement is crucial for maintaining the rule of law, protecting consumers, ensuring fair market practices, and safeguarding environmental and public health. In Thailand, robust enforcement mechanisms are essential for fostering investor confidence, supporting sustainable development, and promoting social welfare.

Despite significant progress in implementing regulatory management tools and good regulatory practices, regulatory delivery does not yet seem to be part of Thailand's “better regulation” toolbox. There is no government-wide policy focused on regulatory enforcement. Each regulatory enforcement and inspection agency is responsible for its own approach and style of enforcement. Moreover, no explicit, published cross-sectoral policies addressing the organisation, governance, and functioning of enforcement and inspection authorities exist in Thailand.

According to some interviewed businesses, enforcement, or the lack thereof, poses a significant issue in Thailand. There seems to be a general belief that the stronger and more prescriptive a law is, the easier it is to achieve its objectives. A similar perception prevails regarding the severity of sanctions – higher penalties are thought to automatically lead to higher compliance. However, this is not in line with international evidence and best practice. Additionally, a perception of unfair and/or uneven enforcement may undermine stakeholders' confidence in the rule of law and, consequently, trust in government.

Inspection and enforcement-activities should be more risk-based

While some agencies plan and at least partially target their inspections on areas of regulation with the highest potential risk – such as the Department of Labour Protection and Welfare focusing on hygiene regulations or human trafficking – risk-based methods are still not widely used in planning and executing inspections.

Inspection planning is often reactive, based on complaints received from the public, consumers, and other sources. Some agencies, however, adopt a more proactive approach, planning inspections based on their own criteria, which may incorporate risk management to some extent (e.g., the Bank of Thailand or the Office of the Consumer Protection Board). No cases were reported to the OECD where inspection planning was based on the previous compliance record of individual regulated subjects. The use of risk-based methods should be more widespread.

The Thai Securities and Exchange Commission (SEC) employs an AI-based tool designed to enhance the efficiency and effectiveness of the SEC’s supervisory and inspection processes called “e-enforcement”. The system allows for the automatic collection of data from regulated entities, reducing the need for manual submissions and minimising errors. It includes tools for analysing the collected data to identify trends, detect anomalies, and assess compliance risks. The system enables real-time monitoring of market activities and the behaviour of regulated entities. The e-enforcement system supports a risk-based approach to inspections, allowing the SEC to focus on high-risk areas and entities, thereby optimizing resource allocation. The introduction of the e-enforcement system by the Thai SEC represents a significant advancement in regulatory technology. It aligns with global trends towards digitisation and automation in financial regulation, helping the SEC maintain a robust regulatory environment that supports investor confidence and market integrity.

Recommendations

Thailand should consider developing an overarching, whole-of-government policy on regulatory delivery, incorporating risk-based approaches to regulatory enforcement, better targeting and co-ordination of inspections, and promoting compliance, in line with the OECD Best Practice Principles. This policy should be developed in co-operation with enforcement agencies, integrated with other regulatory management initiatives, and its implementation co-ordinated by a central body, such as OCS.

Reference

[1] OECD (2014), Regulatory Enforcement and Inspections, OECD Best Practice Principles for Regulatory Policy, OECD Publishing, Paris, https://doi.org/10.1787/9789264208117-en.