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Growth and redistribution impacts of income taxes in the Thai Economy: A dynamic CGE analysis

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  • Bhattarai, Keshab
  • Benjasak, Chonlakan

Abstract

A reform in the personal income tax (PIT) is helpful in reducing inequality in the distribution of income and consumption in both short and long terms in Thailand. It boosts private consumption, investment, employment, capital stock, exports, imports and GDP. Output, employment and capital stock in every sector grow faster with the reforms in the personal income tax than without reforms. While the revenue from the PIT decreases with a cut in PIT rate, the total revenue of the government still remains at the same level before such cut as increase in revenue from other taxes can compensate for the decrease in revenue from the personal income tax. These conclusions are based on results of the dynamic CGE model of the Thai economy constructed for this paper which was calibrated to the micro-consistent data contained in the most recent Input-Output Table of Thailand obtained from the OECD and the household-quintile data collected from the National Statistical Office in Bangkok. This study makes a unique contribution to the literature on the dynamic CGE model of Thai economy assessing the magnitudes of the complicated and asymmetric economy-wide income and substitution effects from reduction in PIT rates over coming 25 years. This DCGE model could be further applied to study impacts of fiscal or financial, pension or health care policies in Thailand, with some modifications.

Suggested Citation

  • Bhattarai, Keshab & Benjasak, Chonlakan, 2021. "Growth and redistribution impacts of income taxes in the Thai Economy: A dynamic CGE analysis," The Journal of Economic Asymmetries, Elsevier, vol. 23(C).
    • Handle: RePEc:eee:joecas:v:23:y:2021:i:c:s1703494920300360
    DOI: 10.1016/j.jeca.2020.e00189
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    Cited by:

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    2. Zhang, Jinbo & Liu, Lirong & Xie, Yulei & Han, Dengcheng & Zhang, Yang & Li, Zheng & Guo, Huaicheng, 2023. "Revealing the impact of an energy–water–carbon nexus–based joint tax management policy on the environ-economic system," Applied Energy, Elsevier, vol. 331(C).
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    4. Proque, Andressa Lemes & Betarelli Junior, Admir Antonio & Perobelli, Fernando Salgueiro, 2022. "Fuel tax, cross subsidy and transport: Assessing the effects on income and consumption distribution in Brazil," Research in Transportation Economics, Elsevier, vol. 95(C).
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    More about this item

    Keywords

    Tax policy; Personal income tax; Thailand; Dynamic CGE;
    All these keywords.

    JEL classification:

    • C68 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Computable General Equilibrium Models
    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • H20 - Public Economics - - Taxation, Subsidies, and Revenue - - - General
    • H24 - Public Economics - - Taxation, Subsidies, and Revenue - - - Personal Income and Other Nonbusiness Taxes and Subsidies
    • H30 - Public Economics - - Fiscal Policies and Behavior of Economic Agents - - - General
    • O53 - Economic Development, Innovation, Technological Change, and Growth - - Economywide Country Studies - - - Asia including Middle East

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