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Published on March 10, 2008

Korn said the Bt40-billion cost of the tax package should have been set as the government's mid-year budget, providing totally free education for students, allowances for public-health volunteers and topping up the budget for the Small Medium and Large (SML) Village Fund scheme.

Spending on the three projects will really stimulate consumption, reduce people's financial burdens and be fairer, he said.

But the tax-exemption measures miss the point, because they will stimulate more savings and reduce consumption.

Moreover, the tax-exemption packages will benefit only middle- and high-income groups and not lower-income people who really need help.

Only part of the corporate tax exemptions will be spent, he said. The rest will be saved as companies' accumulated profits and distributed to shareholders at the end of the year, so there will be a time lag before the money is returned to the system.

The government claims the Bt42 billion it will sacrifice to the tax measures will be returned in the form of consumer spending and value-added tax while stimulating the economy.

However, Korn said the government would not receive that much back. Much of the money would go to generating interest from the savings of wealthy people.

Shadow deputy finance minister Sansern Samalapa said Thais would spend only 60-70 per cent of the money they gained from the tax exemptions and save the rest.

The three projects the Democrats believe should be supported, including totally free education, were part of the party's election platform.

Korn said free education for students would require Bt35 billion more than provided by the current budget, the public-health allowance would take another Bt5.7 billion, and an additional Bt19 billion should be allocated to top up the budget for SML projects.

He said there was still more room for the government to provide additional budget allocations within its deficit budget while maintaining stability. It could increase the deficit from 1.5 per cent to 2-2.5 per cent.

Asked if he opposed the tax measures, Korn said he would place less priority on them, because they might be unnecessary.

He would stress allocating additional budget sums.

Sansern said he was worried about the government's fiscal discipline. While it says its measures will help grass-roots people, they will actually push up the ratio of public debt to gross domestic product.

Kornchanok Raksaseri

The Nation