Several economic think tanks behind the country’s past successful monetary policy are disagreeing with the government’s plan to increase its populist projects funding through an increasing of value added tax (VAT) by one percent from currently seven percent.

Associate Professor Dr. Sompob Manarangsa commented it is not the appropriate time right now to push that burden to average consumers.

“VAT increase is associated with the risk of economic unstabilization, because of higher cost of manufacturing,” he said.

“The manufacturers will eventually push away this kind of burden to product buyers, and thus prompts stop spending,”

He said the Thai economy has just turnaround from the recent regression and it is too soon to take the approach.

Dr. Sompob suggests the government considering revising its inheritance and property tax structure as an alternative resource for funding its populist projects.

Thammasart University’s Associate Professor Dr. Somchai Pakapasvivat warns that the government is going to follow the same trouble which has happened in several countries in Latin America.

He said the country’s loan to reserve fund is at a low level currently. This should be adequate to fund the country’s any necessary fundamental development projects. The government should focus more on a midterm or long term policy in order to sustain its financial stabilization.

In the meantime, Chamber of Commerce University’s Associate Professor Dr. Thanavat Pholvichai has raised the eyebrows with the government’s purpose to use the funding.

He said he is strongly disagreed with the populist policy. Instead, the government should give priority to an incentive foreign investment package to persuade even more investors to come to the country. Thailand’s investment tax is still high comparing with the neighboring countries’ average of 20 percent and Hong Kong’s 10 percent.

Mr. Abhisit’s administration recently announces it is considering hiking VAT rate to eight percent from currently seven percent to help fund several government development project in the country’s rural areas.