Inequality in Household Real Estate Ownership and the Effect of Property Taxes on Income Inequality in Thailand

Abstract

ABSTRACT The Thai government replaced property taxes on real estate with land and building tax in an effort to increase local government revenue, improve tax administration, and reduce land concentration and price speculation. However, housing and farming properties valued at less than 50 MB, which represents 99.96% of all real property in Thailand (DLA, 2018) are exempted.  This study applies Shorrocks Index decomposition by income quintile, region and municipal area to measure income and asset inequality in Thailand over the period of 2007-2017.  Thai household income and assets data were taken from the Socio-economic Survey (SES), which is standardized with national statistics.  The analysis is done under three scenarios: (1) previous property taxes, (2) land and building tax, and (3) land and building tax without exemptions.  Inequality of assets was higher than income inequality throughout the period, and it was found that the majority of inequality stemmed from inequality in Bangkok and other urban areas.  The empirical results support the concept that land and building tax, as the new tax regime, can generate much higher revenue for local government and better reduce inequality; however, if land and building tax is levied on all property regardless of value, it would generate much higher revenue, and the household tax burden would be rather small.   Keywords: Property Tax, Wealth Concentration, Income Inequality, Subgroup Decomposition