General Equilibrium Impacts of VAT and Corporate Income Tax in Thailand

Abstract

In this paper, a computable general equilibrium model of Thailand is constructed in order to assess economy-wide impacts of reforms in the value added tax (VAT) and corporate income tax (CIT) on welfare and reallocation of resources across production sectors in the Thai economy. The model was calibrated to the micro-consistent benchmark data set contained in the Input-Output Table 2010 published by the Office of National Economics and Social Development Board with restructuring into 18 sectors. Findings reveal that aggregate net changes in welfare from a 10% VAT rate are better than from a 0% VAT. Thus, increasing VAT from 7 to 10% is a desirable policy action on the basis of economy-wide welfare analysis because utility generated from public services for the households more than compensates their loss in utility due to higher taxes. On a net welfare basis, decreasing the CIT rate from 30 to 20% is more preferable policy than reducing it to 23%. This model-based analysis is a unique contribution to the current literature on impacts of VAT and CIT in the Thai economy. Further scope remains for full impact analysis of comprehensive reforms such as the goods and services tax, with a dynamic model and many households.

Dynamics of Heteroscedasticity Modelling and Forecasting of Tax Revenue in a Developing Economy: A Review

“…Hassan [60] examine extensively on literature, concentrating on theory and empirical studies, on the relationship between VAT revenue and economic growth used the Ordinary Least Square (OLS) Regression technique to. Olufemi, Jayeola [85] investigated the relationship between tax revenue and economic development in Nigeria using Auto-Regressive Distributed Lag (ARDL) Regression Benjasak and Keshab Bhattarai [86] Generalized Equilibrium Impacts on VAT and Corporate Tax in Thailand using CGE model. However, in recent times there are numerous kinds of literature reviewed which is shown above it is obvious that volatility in the financial time series data (tax revenue) still suffers a great challenge from both the data and the model that are used to capture the heteroscedasticity in the data.…”

Is the value added tax reform a source of food insecurity and food poverty? The Burkina Faso case

“…Their consumption and income decreased due to a general increase in consumption prices and a decline in jobs, which made them more vulnerable to poverty. The impact of an increase and/or extension of VAT has also been studied in Pakistan (Ahmed et al, 2011), Sudan (Mohamed, 2012), Ethiopia (Mengistu, 2013), Thailand (Benjasak & Bhattarai, 2017) and South Africa (Escalante et al, 2021; Roos et al, 2020), showing that the change both decreases household demand and increases poverty. These studies show that despite the improvement in public finances, the negative effects on households can be significant.…”

“…Their consumption and income decreased due to a general increase in consumption prices and a decline in jobs, which made them more vulnerable to poverty. The impact of an increase and/or extension of VAT has also been studied in Pakistan (Ahmed et al, 2011), Sudan (Mohamed, 2012), Ethiopia (Mengistu, 2013), Thailand (Benjasak & Bhattarai, 2017) and South Africa (Escalante et al, 2021;Roos et al, 2020),…”