Improved tax collections key to balance

       The government should raise tax revenues by 10-11% per year to achieve a balanced budget, according to Supavud Saicheua, managing director of Phatra Securities.
       In the 2009 fiscal year that ended on Sept 30, the government set a tax revenue target of 1.47 trillion baht and collected 1.36 trillion in the first 11 months. For fiscal 2010, it is forecasting tax revenue of 1.35 trillion baht,8.5%lower than in the previous fiscal year.
       "The government's attempt to run a budget deficit this year and borrow up to 800 billion baht to invest in the Thai Khem Kaeng scheme will drive public debt to 60% of gross domestic product," he said.
       The Finance Ministry earlier projected that public debt should not exceed 50% of GDP as tax revenues would be only 15% of GDP. In developed countries, governments can collect tax revenues as high as 25-30% of GDP, so public debt can soar to 70% of GDP.
       "We forecast that if the Thai economy expands less than 3% per year,the country will face high public debt problems," said Dr Supavud at a seminar last week.
       The government projects public debt will shrink based on the assumption that the Thai economy grows by 5.5%per year and inflation stands at 3.5%,meaning nominal GDP growth of 9%.
       The government will try to generate additional revenue from other means besides tax increases, because the public could not accept a higher tax burden,he said. However, it could generate more tax revenue when the inflation rate surges as product prices rise and more value-added tax would be collected.
       Dr Supavud believes the Thai economy will pick up next year but that a rapid or V-shaped recovery is unlikely because China, a major growth engine for the global economy, would have slower growth next year.
       The Chinese government slowed its economic stimulus plan to prevent a bubble economy. This is a risk for the Thai economy and Thailand will probably have a W-shaped recovery, he said.
       "The Thai Khem Kaeng programme allows the government to inject money into the economy, thereby increasing the competitiveness of the country,"he said.
       Thailand should have a strategic plan to make itself an investment hub for international companies, he added.Alternatively, the country could use its strength in agriculture to develop agricultural products, or develop new tourism markets such as home stays for senior citizens or retirees, he said.
       Surathien Chaktaranon, an independent academic, said private investment would not pick up even if exports improve following the global economic rebound.
       "Some investors are still worried about political risks and some would relocate their plants to other countries if local politics remain uncertain," he said.