50 largest landholders control 14.3% of Phuket

PHUKET: Land ownership in Phuket is highly concentrated in the hands of a relatively small group of wealthy landowners, according to a prominent Thammasat University economics professor.

Prof Duangmani Laowakul, a member of the watch-dog committee Policy Watch, said the top 50 largest landholders in Phuket control 14.3% of the island’s total area.

A report published in Krungthep Turakij, the Nation Group’s Thai-language business newspaper, reveals to some extent the concentration of wealth in Thailand.

It also hints at the failure of meaningful land reform in this nation of farmers – and suggests that the inaction of successive governments in overhauling Thailand’s land tax structure and enforcing tax collection is purely a matter of self-interest on the part of those in power.

According to the report, 90% of individuals own less than one rai of land, while 10% own 100 rai or more.

According to the National Thai Institute of Land, some 70% of private land holdings lie idle, held only for purposes of speculation. This costs the economy 127 billion baht yearly, according to the researchers.

Concentration of land holdings may be even greater than the above-mentioned figures indicate.

According to Dr Duangmani, a Thammasat University economics professor, the top 50 landowners in Bangkok own 10.1% of the land in the capital.

Those figures may not appear large, but they add up to a lot of land, he said.

Loss of economic productivity through concentration of land in the hands of speculators is, moreover, not compensated by taxation on that land.

Taxes and fees collected by the government for Fiscal Year 2009 were estimated at only 31.7 billion baht, the report noted.

However taxes and fees were paid by only 5.6 million individuals, or just 8.4% of the population. The reason for that is that tens of millions of Thais own no land whatsoever.

A 2006 survey by the Thailand Development and Research Institute (TDRI) divided families into five groups: the richest 20% held 69% of the nation’s assets; the poorest 20% held only 1%.

Moreover, the richest 10% have three times the assets of the second 10%.

The way to overcome monopoly control of land is by re-writing the tax code relating to land and structures. A draft law has been presented for consideration to Cabinet by the Finance Ministry.

The old law is marred by the fact that tax is calculated on ‘annual income’ rather than on assessed value. Moreover, assessments can be overturned at the discretion of officials, so money leaks from the system easily and exceptions are handed out. The result is inequities that make tax collection problematic.

The high rate of assessment increase, 12.5% per annum, impels avoidance, while the Improvements Tax decreases with time, meaning that taxes go down as values go up. Finally, valuations are established on a basis calculated 30 years ago and now out of date, the researchers found.

A new law should be enacted that places the burden of taxation on the wealthy rather than the poor, the researchers said. They recommend that property valuations be re-considered every four years, and that the highest assessed rate, that on commercial property, be no greater than 0.5% per annum; that assessment on residential property be no greater than 0.1%; and that on agricultural land be 0.05%.

Tax collection and income to the state will be greatly enhanced if such reforms were enacted, they say.

Past attempts to improve tax collection found the chief impediment to be lawmakers themselves.

According to the National Counter Corruption Commission, filings by politicians in the last four governments, beginning with that of Thaksin Shinawatra, reveal that “ten former officials hold land valued at more than five billion baht… and that doesn’t include holdings they haven’t revealed, which we expect is an amazing amount.”

The report goes on to list some of the wealthiest landowners among present and former governments, starting with the Thaksin administration.

The authors conclude that since enactment of change is opposed to the self-interests of the powerful, “reform will pass only with the greatest difficulty” during the Abhisit administration.