Burin outlined measures to restore fiscal balance and credibility:
- Expand the tax base – bring informal workers and businesses into the tax system and plug loopholes.
- Raise tax rates gradually – particularly value-added tax (VAT).
- Cut spending – reduce recurrent expenditures by shrinking the public payroll and adopting technology such as AI to improve efficiency.
- Target welfare – ensure benefits go only to eligible groups to avoid duplication.
- Avoid wasteful populism – limit policies seen as excessive or ineffective, and allocate budgets more prudently.
Thailand faces two decades of chronic deficits
Thailand has run chronic budget deficits for more than 20 years without signs of recovery, according to Athiphat Muthitacharoen, Director of the Chulalongkorn Economic Research Centre.
He noted that Moody’s recently cut the country’s outlook to negative, while other rating agencies have flagged public finance as a growing risk. Compared with peer economies, Thailand’s fiscal position is clearly weaker.
The cost of servicing debt is also rising. Interest payments currently account for 9% of state revenue and are projected to reach 11% next year—above the threshold for investment-grade economies. Athiphat said the outlook downgrade is a critical warning, and if Fitch and S&P follow suit, pressure on Thailand will intensify.
Tax reform is now seen as the most feasible lever, as spending cuts are politically harder to implement. Yet Athiphat stressed that Thailand is not in a fiscal crisis: most debt is baht-denominated, long-term, and over 80% is held domestically. The real risk lies in market confidence—if investors believe fiscal discipline is lacking, borrowing costs could spike.
Half of state revenue is already allocated to debt repayment. The tax base remains narrow: 75% of tax income comes from personal income tax, corporate tax and VAT.
Only 14% comes from personal income tax, with just 4 million taxpayers—around 10% of the workforce—while a vast informal economy and growing exemptions have cost the state about 20% of potential revenue.
Corporate income tax accounts for 27% of revenue, but generous Board of Investment (BOI) privileges, worth over 200 billion baht annually—or 30% of corporate tax income—undermine collections.
Transparency has also declined, as data on tax expenditures has not been published since 2018. Corporate tax is capped at 20%, below the regional average of 23%. VAT contributes the most at 23%, though still below the legal ceiling of 10%, with any increase considered politically sensitive.
Athiphat recommended a three-pronged approach:
- Tax burden map – Publish a breakdown of who pays what to ensure fairness and build social consensus.
- Transparency and oversight – Disclose the cost of tax privileges and establish an independent fiscal institution to monitor them.
- Long-term roadmap – Follow models like Singapore and Japan, gradually closing loopholes, broadening the tax base, and phasing in higher VAT if needed.