ESTIMATION OF TAX EVASION AND THE EFFECTIVENESS OF TAX COLLECTION FOR THAILAND
ABSTRACT Low tax revenue is an acute problem for the Thai Government, one which causes a lack of funds for much needed economic and social development. The cause of the low tax revenue is ineffective tax administration. Thus the purpose of this research was to measure the tax effectiveness in Thailand. The review presents the popular Tanzi’s monetary approach for estimating the level of tax evasion and it has resulted in the hypothesis that tax evasion generally increases alongside the growth of the economy. However, his approach overlooks two aspects which reduce the accuracy of the findings: velocity of money and the legal effect of the tax rate. Thus, in this research, some adaptations were made in order to achieve more accurate estimation. The model was applied to macro-economic data from sources such as Bank of Thailand and Eco Win database covering period 1980 to 2006 and results indicated that tax evasion during this period was probably in the region of 5.5-15%. Figures suggest firstly that as the economy has grown, tax evasion has reduced, but that secondly, the least tax evasion occurred during the economic crisis of 1997. The former finding corresponds to the research by IMD surveys (2005) which showed that highly developed countries have low tax evasion. The latter finding was tested for structural break and the results support the view that there is no change in behavior during the crisis but that the high drop of tax evasion is caused by both the legal and illegal effects of tax rate. In addition, another method for estimating tax evasion, Tax Compliance Measurement Program (TCMP), was applied in measuring the individual tax auditor performance. This applied method is a good incentive for tax auditors to improve their effectiveness in detecting more tax evasion.
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