Tax Revenue Loss and Education in Thailand

February 17th, 2010

This blog post is the second of a four part series, which highlights country case studies of tax revenue loss from trade mispricing, the topic of a recent paper by Global Financial Integrity, “The Implied Tax Revenue Loss of Trade Mispricing.”  To read the first post, please visit Tax Revenue Loss and Public Debt in Costa Rica.

In today’s post, we visit Thailand in Southeast Asia. Thailand is a democracy nestled between Myanmar, a harsh authoritarian regime, Laos, a single-party socialist republic, and Cambodia, a constitutional monarchy.  Despite the dramatic military coup which occurred in 2006, Thailand has returned to a democratically elected government. According to the Economists Intelligence Unit, the country also has a well-developed media sector, though in recent years there have been problems relating to censorship and political interference.

Thailand has seen dramatic improvements in infrastructure over the past decade, most notably in terms of mass transit networks in the capital, Bangkok.  Despite these improvements, Thailand still faces weaknesses in infrastructure, and budgetary constraints have “meant that the upgrading of national highways has been slow” (EIU).  The new GFI report, The Implied Tax Revenue Loss of Trade Mispricing, estimates that between 2002 and 2006, the government of Thailand lost a yearly average of US$1.4 billion to trade mispricing, which is about 4% of its yearly government revenue.  This flow represents about half of what the government hopes to spend on new roads and highways each year.

The literacy rate in Thailand is high, but the quality of secondary and higher education does not meet the requirements for an expanding economy to remain internationally competitive.  Enrollment in primary school is also high; in 2007 the statistic was about 88% enrollment.  The enrollment in colleges, however, remains at a low 22%.  While education reform is well-intentioned in Thailand, the country is far behind schedule.  The National Education Act of 1999 set a three-year goal for reform of the entire education system, but many of the deadlines were missed.  In 2002, the government initiated a guarantee of 12 years of free education to all school-aged children, but the program faces significant problems.  Most prominently, there is limited access to schooling for the disadvantaged and the financial resources to guarantee twelve years of education were not available.

The graph below shows the school-age population of Thailand, broken down by enrollment in the education system and the cost to educate those students who are not currently enrolled in the education system.  The data for this graph was obtained from a combination of three sources: the Ministry of Education in Thailand, the Economist Intelligence Unit (EIU), and the CIA World Fact Book.

This graph shows that, assuming the prices estimated by the Ministry of Education, the yearly cost to educate the entire school-aged population of Thailand that is not currently enrolled would be just under US$1.27 billion (this number is off to the side).  The numbers above each bar is the total cost to educate the non-enrolled students (shown in red).

The recently published GFI report shows that in that same year the Thai government lost US$2.57 billion in tax revenue loss due to trade mispricing. This amount is over twice the cost of educating the entire population of Thai children and adults that are not currently in school, from primary school to higher education.  A significant figure indeed.

You can read the entire GFI report, “The Implied Tax Revenue Loss from Trade Mispricing,” here.  To read the next post in this series, Tax Revenue Loss and Malaria in Mali, please click here.

Written by Ann Hollingshead

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