Excise Taxes and Provincial Economies

Abstract

This paper investigates the relationship between excise tax and provincial economies in Thailand, using a panel data (77 units over 5 years span, BE2557-2561). Excise taxes generated 611 billion baht to the government treasury as of FY2561 and could be categorized under 23 items. Excise taxes are grouped into 3 broad categories, viz, i) environmental tax, ii) sin tax, and iii) luxury tax for analytical purposes. Descriptive statistics are illustrated and then compared by regional groups followed by comments and discussions. Econometric models are taken to test hypothesis and to estimate relationships in which provincial excise revenues (in log scale) are dependent variables and tested against a set of explanatory variables that include provincial GPP, productive structure of province economies. Among our findings: First, excise tax elasticity to GPP is found to be in the range of 1.8 and 1.9 which implies high degree of responsiveness of excise tax to GPP change; Second, excise tax has long been highly concentrated in selected provinces, especially those provinces with the highest share of industrial value added. Third, the null hypothesis that tax concentration (measured by Gini coefficient) has a tendency to decline over time is rejected; i.e., no tendency of a decline in tax concentration.