Hong Kong used to be a role model for good economic policy, but China’s crackdown has had a negative effect, so Singapore is now considered the jurisdiction with the most economic freedom.
But I also like to cite Taiwan, which is a top-20 nation for economic liberty.
Especially if the alternative is Thailand, which only ranks #65.
Unsurprisingly, differences in economic freedom translate to differences in per-capita GDP. Here’s a chart based on the Maddison database.
One reason for the big gap is that Thailand has a bigger burden of government spending.
This second chart utilizes IMF data to compare the three nations.
Looking at these two charts, one obvious conclusion is that Thailand should reduce the burden of government spending.
It makes sense, after all, to mimic the policies of nations that are much richer.
Unfortunately, the bureaucrats at the Organization for Economic Cooperation and Development must have flunked Econ 101.
The Paris-based bureaucracy just published a report that explicitly urges the Thai government to increase taxes and spending.
I’m not joking. Here are some excerpts.
Thailand has made significant progress in expanding its social protection system in recent years, but there is scope to further expand coverage and increase benefit levels. …spending on social protection (excluding healthcare) is only 2.1% of gross domestic product (GDP), which remains low in international comparison… Additional public spending requires increasing Thailand’s tax-to-GDP ratio…
Raising more tax revenues will require reform across a wide range of direct and indirect taxes. There is scope to increase the standard value added tax (VAT) rate (currently at 7%)… The role of the personal income tax could be strengthened… Further, the dividend withholding tax rate could be increased. …the ceiling on social security contributions…could be raised to increase the contributions from higher incomes.
For those keeping score, the OECD wants more income tax revenue, more payroll tax revenue, and more value-added tax revenue.
And if you read the entire report, they want more energy taxes, more excise taxes, and other taxes as well.
Here’s the OECD’s list of recommendations.
We may as well call this the turn-Thailand-into-France recipe.
Except France became a (relatively) rich nation when government was very small and then made the mistake of adopting an expensive welfare state.
The OECD wants Thailand to adopt a costly welfare state today, which means the country (notwithstanding absurd OECD analysis) will never become rich.
To make matters worse, the OECD is subsidized by money from American taxpayers. So I’m helping to pay for terrible advice that will hurt the people of Thailand.
P.S. Adding insult to injury, OECD bureaucrats get tax-free salaries. So those hypocrites push tax increases on everyone else while being insulated from suffering any real-world consequences.
P.P.S. To be fair, the OECD wants all nations to have higher taxes and bigger welfare states, so it’s not selectively attacking Thailand.
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