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

Keshab Bhattarai and Chonlakan Benjasak

The Journal of Economic Asymmetries, 2021, vol. 23, issue C

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.

Keywords: Tax policy; Personal income tax; Thailand; Dynamic CGE (search for similar items in EconPapers)
JEL-codes: C68 D58 H20 H24 H30 O53 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.jeca.2020.e00189

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