THAILAND

Since 1961, the National Municipal League of Thailand (NMT) has existed in the country, an organization created by the Ministry of the Interior to support local governments. The NMT is an organization that seeks, among other things, “to promote the cooperation and the relationship between municipalities and local government”. The NMT has also been a relevant actor in the discussion to deepen the autonomy and control of sub-national authorities in provincial affairs.

TERRITORIAL ORGANISATION
Municipal Level [1]	INTERMEDIATE LEVEL	PROVINCIAL LEVEL	TOTAL NUMBER OF SNGs (2020)
30 city municipalities (theseban nakhon); City of Pattaya; 179 town municipalities (thesaban mueang); 2 233 sub-district municipalities (thesaban tambon);		75 Provinces (Changwat); Metropolitan City of Bangkok
Average municipal size: 28 271 inhabitants
2 443		76	2 519

[1] Name and number of sub-municipal entities: 7 255 Tambon Administrative Organizations (TAOs) and 180 khwaeng.

OVERALL DESCRIPTION: According to the 1991 State Administration Act, Thailand’s organization comprises two tiers of subnational government: provincial and local. The municipal level comprises three types of municipalities and the City of Pattaya, which enjoys a special regulatory status. At the regional level (in the 75 provinces and the City of Bangkok), the national government is represented through deconcentrated entities.

Since 2016, there are three categories of Special Economic Zones (SEZ) with a specific set of rules and incentives for economic development. These include the Eastern Economic Corridor, the Clustered Provinces and the Provinces bordering other ASEAN countries. Municipalities and provinces may belong to several SEZs at a time.

PROVINCIAL LEVEL: Thailand is divided into 75 provinces (changwat) and the Metropolitan City of Bangkok. Provinces have both a decentralized democratically elected body, the Provincial Administrative Organizations (PAOs), and a deconcentrated entity, headed by a nationally appointed governor in charge of implementing national policies and coordinating the work of line ministries in provinces. PAOs were established by the Provincial Administrative Organization Act of 1997. Since 2003, each PAO is headed by a chairperson and a provincial committee, whose members cannot be part of the legislative provincial council. The legislative provincial council is elected for a period of four years. Governors, on the other hand, are appointed by the Ministry of Interior.

The capital city of Bangkok is administered by a special body called Bangkok Metropolitan Administration (BMA), which since 1985 enjoys provincial status. The BMA is the only province that elects both its PAO and governor. Bangkok is the country’s capital and largest city, with an estimated 10.5 million inhabitants in 2020.

Provinces are further divided into administrative districts or counties (amphoe), which according to the 1991 State Administration Act, are part of the provincial administration. Districts are sub-divided into tambons, which in turn are further divided into villages (muban). These local administrative units have heads designated by the higher levels of government or in some cases can also be democratically elected, and perform functions of community organization and provision of certain public services, in coordination with the provinces and municipalities.

MUNICIPAL LEVEL: Local governments in Thailand include 2 442 municipalities and the City of Pattaya, which has a special status. Municipalities are divided into City Municipalities (more than 50 000 inhabitants), Town Municipalities (10 000-49 999 inhabitants), and Sub-Districts Municipalities (8 000–9 999 inhabitants). The establishment of municipalities was based on the 1953 Municipality Act, while the City of Pattaya was established by the City of Pattaya Administrative Act of 1999.

In addition, there is a sub-municipal administrative level: the Tambon Administrative Organizations (TAOs), a mostly rural unit aimed at organising and canalising community participation. As of 2016, there were 7 255 TAOs plus 180 khwaeng (equivalent sub-municipal entities located in Bangkok). Both municipalities and TAOs are led by democratically elected mayors and chairmen, respectively. The composition of both the municipal and TAO councils varies according to the area under their jurisdiction.

HORIZONTAL COOPERATION: The Constitution makes no reference to horizontal cooperation, neither between municipalities nor between provinces. The State Administration Act of 1991 only mentions coordination to refer to the relationship between amphoes and local governments in the preparation of community plans for the management of local budgets.

According to the 2017 Constitution, the allocation of responsibilities is organized under the principle of subsidiarity and there is greater flexibility in terms of finance and human resources management than in the framework of the previous Constitutions. Formally, subnational governments may operate jointly with, or delegate operations to, private organizations or central government agencies. Their core responsibilities are formally established by the 1999 Decentralization Act. PAOs are regulated by the 1997 Provincial Administrative Act, which establishes provincial competences including legislative matters, the preparation of development plans, assistance in development as well as the allocation of budget to lower governance levels. The responsibilities of the Bangkok Metropolitan Administration are the same as PAOs. Local governments, on the other hand, have been assigned functions in six areas: public infrastructure; quality of life improvement; order and security; local planning and economic promotion; environmental preservation; and cultural conservation.

Whereas local governments and provinces share a lot of tasks in many areas related to public services (e.g. education, public health, social security and welfare, urban planning, water sewage, among many others), the central government still controls the provision of services that are considered “National Public goods”, such as primary education, foreign affairs and defence. As such, health and education spending at the local level are made under strong guidance of the related ministries.

Since the publication of the 1999 Decentralization Plan and Process Act, Thailand has devolved several functions from the central to the subnational levels of government. As of 2019, 262 functions were devolved, of which 44 new functions were devolved under the 2002 Decentralisation Action Plan, and 44 under the 2008 Decentralisation Action Plan. More recently, the Department of Local Administration has introduced a new bill, the Enforcement of Local Administration Organisations Code, which will narrow the scope of local governments and recentralise some competencies to the central government.

Main responsibility sectors and sub-sectors
SECTORS AND SUB-SECTORS	Provincial level	Municipal level
1. General public services (administration)	Public buildings and facilities	Delegated administrative services (marriage, birth, notary, national statistics, tax collection);Public buildings and facilities
2. Public order and safety	Firefighting services (jointly with the central government); Civil protection and emergency services; Traffic lights and urban traffic signs	Firefighting services; Assistance to state government in public order and safety
3. Economic affairs / transports	Regional, city and district roads; Intra- and inter-city transport; Agriculture and rural development; Tourism; Local Commerce	Support to municipal development; Tourism; Local Commerce; Waterways and harbour maintenance
4. Environment protection	Parks & green areas; Waste management; Street cleaning; Sewerage; Nature preservation	Street cleaning; Sewerage; Nature preservation
5. Housing and community amenities	Construction/renovation of public facilities (jointly with the central government); Drinking water distribution; Public lighting; Urban and land use planning; Urbanism	Distribution of drinking water; Urban and land use planning
6. Health	Hospitals; Primary healthcare (medical centres) and preventive healthcare	Public health promotion
7. Culture & Recreation	Regional museums; Cultural heritage; Sports; Local museums; Libraries	Libraries; Cultural activities
8. Education	Secondary and higher education; Pre-primary and primary education	Pre-primary and primary education; Secondary education
9. Social Welfare	Elderly; Disabled people (benefits and services); Social care for children and youth; Support services for families (jointly with the central government)	Support to state government in reducing unemployment and registering of low-income families; Elderly; Social care for children and youth

Scope of fiscal data: City municipalities, town municipalities, the Pattaya City Council, PAOs and the Metropolitan city of Bangkok.

IMF-GFS

Availability of fiscal data: High

Quality/reliability of fiscal data: High

GENERAL INTRODUCTION: Subnational government finance is regulated by the 1999 Decentralization Act, according to which subnational governments receive central government transfers and are granted the capacity to raise local revenue from several sources. The Act also defines subnational governments’ powers over local expenditure and service delivery.

Thailand subnational governments’ finance faces two important challenges. On the expenditure side, subnational government decision-making capacity is very limited, since the central government has full control over budget allocation via the National Decentralization Committee (NDC). On the revenue side, subnational governments lack fiscal autonomy and self-reliance, and are heavily dependent on grants and subsidies from the central level, which are also insufficient to cover public services. There are important fiscal disparities across Thailand’s subnational governments, starting with the limited revenue assigned to PAOs in comparison to other tiers of government. Disparities are also important when comparing rural and urban areas. Fiscal imbalances result from differences in the capacities of raising local tax revenues and the insufficient resources transferred through equalization grants. Overall, there is a significant underfunding of service provision at the local level throughout the country.

Subnational government expenditure by economic classification
2020	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total expenditure	728	4.0%	15.9%	100%
Inc. current expenditure	496	2.7%	13.0%	68.2%
Compensation of employees	155	0.9%	13.9%	21.2%
Intermediate consumption	298	1.6%	25.9%	41.0%
Social expenditure	0,2	0.0%	0.0%	0.0%
Subsidies and current transfers	40	0.2%	5.2%	5.6%
Financial charges	3	0.0%	1.7%	0.4%
Others	0	0.0%	0.0%	0.0%
Incl. capital expenditure	231	1.3%	29.5%	31.8%
Capital transfers	0	0.0%	0.0%	0,0%
Direct investment (or GFCF)	231	1.3%	30.5%	31.8%

EXPENDITURE: Subnational government expenditure in Thailand has remained among the lowest in the Asia-Pacific Region for the last years. In FY2020, subnational government expenditure accounted for 4% of GDP and 16% of total public expenditure, while the regional averages hovered around 12% and 37%, respectively. Subnational government current expenditure are mainly dedicated to the intermediate consumption of goods and services (41% of subnational government expenditure) and to cover staff expenses (21.2%).

DIRECT INVESTMENT: In 2020, direct investment by subnational governments represented almost a third of total spending at the subnational level (32%) and also an important share of public investment at the national level (31%), ratios that have been stable since 2016. Subnational governments in Thailand carry out public infrastructure projects which can be financed by own revenue or, more commonly, through specific transfers from the national government. Subnational governments do not, however, enjoy much autonomy to carry out public investment, since these projects are allocated under the supervision of the national government and must be strictly aligned with the guidelines of the ministries and strategies issued from the central level.

Following the publication of the Private Participation in State Undertaking Act in 1992, Thailand has sought to promote private sector participation in the financing of public infrastructure. The development of the regulatory framework for PPPs was consolidated in 2013 with the publication of the Private Investment in State Undertaking Act, which established standardization, facilitation and transparency processes for PPP projects. In 2019, Thailand published the Public Private Partnership Act, which aims to increase private participation in infrastructure, encourage knowledge transfer, and improve support measures for PPPs. According to data from the World Bank, from 1990 to date, 185 PPP projects have been approved with a total investment of USD 44 billion. However, subnational governments do not have a significant role in the implementation of PPPs projects.

The Bangkok Metropolitan Administration is an exception, as it has more flexibility to adopt these contracts. A notable example of the success of PPPs in Bangkok is the Metropolitan Waterworks Authority, which in 2000 implemented a project to reduce its non-revenue water (NRW) through a performance-based contract (PBC), a project that allowed the city save 165 million litres per day and reverse the crisis that caused it to lose 40% of its water production.

ⓘ No detailed data available for this country

Detailed data on subnational spending by COFOG are only available in an aggregate way under the General Public Services category. In accordance with national information, the main areas of spending at the subnational level in Thailand are general public services (public administration), education and housing and community amenities, in which the more than 7 000 subnational governments in Thailand (without the BMA) spends around 22%, 19% and 18% of their budgets, respectively. Other relevant categories are Public Works (7%) and Health (4%).

Subnational government revenue by category
2020	Dollars PPP / inhabitant	% GDP	% general government	% subnational government
Total revenue	720	4.0%	19.1%	100%
Tax revenue	231	1.3%	8.1%	32.0%
Grants and subsidies	472	2.6%	-	65.5%
Tariffs and fees	10	0.1%	-	1.4%
Income from assets	8	0.04%	-	1.1%
Other revenues	0	0.0%	-	0.0%

OVERALL DESCRIPTION: In FY2020, subnational government revenue corresponded to 19.1% of total public revenue, or USD 720 per capita. Whereas this figure has remained stable since 2016, the share of tax revenue has slightly decreased (-2 pp), while subnational governments have become more dependent on grants and subsidies from the central government (+4 pp). Tariffs and fees (1.4% of total revenue) and income from assets (1.1%) are minor sources of revenue for subnational governments. With the purpose of reducing fiscal disparities, a fiscal equalisation system aims to reallocate revenue among subnational jurisdictions through a formula based on economic conditions and fiscal needs. However, due to the inefficiency and uncertainty of this fiscal equalization system, there are still significant imbalances in revenue among provincial and local governments.

While municipal governments have been able to collect own resources effectively, PAOs at the regional level have generally had lower revenue and smaller budgets, mainly due to a lack of clarity in their responsibilities and respective resources to take charge of them.

TAX REVENUE: In FY2020, tax revenue accounted for one third of total subnational government revenue, but only 8% of general government tax revenues, which is one of the lowest shares of subnational tax collection in the Asia-Pacific region (in comparison, it represented 51%, 13% and 9% of total tax collection in neighbouring countries such as China, Indonesia and Cambodia respectively). Subnational government tax revenue in Thailand come mainly from shared taxes, which represent more than half of subnational government tax revenue, and to a lesser extent from own-sources tax revenue.

Regarding shared tax revenue, the Fiscal Policy Office of the Ministry of Finance determines the financial revenue share of the national tax to be allocated subnational governments. Subnational governments have no say in determining shared tax rates. Revenue allocation is determined by the locality in which the tax was collected and is formula-based. According to the current regulations, shared taxes amounts include a 11% of the VAT collected in the province, a 10% share of nationally-levied taxes on specific businesses and alcohol, and the tax on petroleum and minerals, which is shared among all tiers of subnational governments. In 2020, the share of VAT transferred to subnational governments and the excise tax each amounted to around 29% of total subnational government tax revenue.

Subnational government own-source (or locally levied) taxes include mostly the land and building tax (property tax), accounting for 3% of subnational government tax revenue in 2020, and a tax on property transfer (15% of subnational government revenue). There are also minor local taxes such as signboard taxes, animal slaughter taxes, bird nest collection taxes, and hotel rental taxes. Provincial governments only levy taxes from the sale of cigarettes, tobacco and gasoline.

In 2020, a new property tax reform was undertaken, with the introduction of a new Land and Building Tax as of 1 January 2020, via the Land and Building Tax Act B.E. 2562 (2019). The new tax replaces and merges the former House and Land Tax and Land Development Tax. It is characterised by a broader tax base, higher rates for vacant land, and a shift in the value assessment, from a rental value towards a market value approach. The rates are established depending on the usage and type of property, with some degree of local autonomy, and tax collection and administration are the responsibility of local governments. In 2020, the tax rates on land and buildings (including agricultural land, residential buildings, vacant land and others) have remained between 0.02% and 0.7%, depending on the category and appraisal value of each property. According to a study from the Asian Development Bank, it is expected to yield an increase of 17% in tax revenue over a period of 3 years. However in 2020, due to the COVID-19 pandemic and related relief measures, revenue from the recurrent property taxes dropped significantly, representing 3% of subnational governments total tax revenue and only 0.04% of GDP (compared with 1.0% of GDP on average in OECD countries in 2020), whereas in 2019, revenue from the property tax accounted for around 15% of subnational tax revenue. To improve the administration of the tax, the central government is currently developing a new centralised property tax database.

GRANTS AND SUBSIDIES: In addition to the tax-sharing scheme detailed above, subnational governments’ grants and subsidies in Thailand are divided into general purpose grants and conditional grants. In 2020, central government grants, excluding shared taxes, accounted for 66% of subnational government revenue: 93% of grants received by subnational governments were destined to current expenditure and the remaining 7% to capital investment. According to recent studies, grants in Thailand have a significant impact on reducing territorial revenue disparities among subnational governments.

General-purpose grants are transferred to local governments to cover vertical fiscal imbalances. Allocation criteria have evolved over time. For PAOs, the criterion is the previous fiscal year. For municipal governments, the formula is based on per-capita expenditure in basic services, and 5% of the total general-purpose grant is reserved as a deficit grant. Between 2007 and 2016, general purpose grants have aimed at strengthening local government finance and reach the threshold of 25% of general government revenue, as required by law. In 2016, the objective was changed to 35% and to date it remains the same. Parts of the general grants are earmarked for specific local activities in social, education and public health policies, under guidance of the Prime Minister Office’s Department of Local Administration (DLA). Municipal governments are not required to record these general-specific grants on annual budget, which makes disaggregation unavailable.

Conditional grants are given out to finance public services that are national priorities. Specific grants are also aiming for infrastructure investment for public services (such as water provision to villages) and projects that have been prioritized by the central administration. Conditional grants have represented around 10% of total grants and subsidies from the central government during the last decade.

OTHER REVENUE: Locally levied revenue other than taxes are fees, fines and permission charges, revenue from public utility provision, revenue from property, and other small sources of revenue. Local governments collect user charges for public transportation and royalty fees from forestry and fishery. In 2020, non-tax own revenue represented 2.5% of total subnational government revenue.

Subnational government fiscal rules and debt
2020	Dollars PPP / inh.	% GDP	% general government debt	% SNG	% SNG
Total outstanding debt	201	1.1%	2.2%	100%	-
Financial debt	67	0.4%	0.8%	33.3%	100%
Currency and deposits	28	-	-	13.8%	41.4%
Bonds / debt securities	0	-	-	0.0%	0.0%
Loans	39	-	-	19.5%	58.6%
Insurance pensions	0	-	-	0.0%	-
Other accounts payable	134	-	-	66.7%	-

FISCAL RULES: The 1999 Decentralization Act established that municipalities may borrow from ministries or other legal persons, and that they can contract loans with foreign organizations and issue bonds with the approval of the Council of Ministers. Between 1997 and 2011, local governments also borrowed from the Local Development Fund. The subnational debt ratio must not exceed 10% of subnational revenues, calculated using a three-year moving average of revenue data. Since April 2018, a new rule for local government borrowing from financial institutions has been in force in Thailand. Local governments can borrow from financial institutions exclusively to spend and invest in three specific objectives: investment projects, debt restructuring, and to manage local government pawnshops with the approval of the central government.

In addition, subnational governments that wish to use debt as a financial instrument must have financial plans, a standard accounting system, an internal monitoring system, and a financial management and repayment system. The central government does not guarantee debt contracted by subnational governments. While fiscal rules for subnational governments are described in the various guidelines provided by the Ministry of Interior and fall under the scrutiny of the Office of the Auditor General, this often results in the Ministry overriding local governments’ budget decisions in order to align them with national priorities.

DEBT: Due to the fact that since 2011 the Ministry of Interior has discouraged local governments from contracting debt, between 2012 and 2017, the subnational debt fell consistently and went from 0.33% to 0.21% of GDP. It registered an increase in 2020, jumping to 1.1% of GDP. In this same period, the subnational financial debt fell from 2.4% to 0.8% as a share of total public debt and from 1% to 0.4% as a share of GDP.

Unlike other local governments, the Bangkok Metropolitan Administration and the City of Pattaya are authorized by law to issue municipal bonds, subject to clearance from the Ministry of Interior: despite positive ratings, the lack of tax revenue has been one of the major hindrances for bond issuance.

TERRITORIAL MANAGEMENT OF THE CRISIS: After the first outbreak of COVID-19 in Thailand, the Prime Minister established the Centre for COVID-19 Situation Administration (CCSA), a coordination mechanism for effective communication and adoption of measures to control the crisis. This Centre functions as a whole-of-government mechanism, with the participation of top-level public administrators from all ministries. The CCSA has been responsible for adopting measures such as school and business closures, limitations to international travel, and restrictions on gatherings.

At the provincial level, the management of the pandemic has been the responsibility of the Communicable Disease Committee (CDC), headed by the governor of each province. The CDCs were established in 2005 through the Communicable Disease Act and have the function of coordinating the management of outbreaks at the territorial level. The CDCs have had to implement at the provincial and local levels the measures emanating from the central level, with which coordination has taken place mainly through the designated governor.

Two mechanisms empowered subnational governments in Thailand to face the crisis: the application of the Communication Disease Act, which allows local governments to make some decisions autonomously, and the use of local health security funds (LHSF, established in 2006 by the National Health Security Office), which according to current regulations, are controlled by local governments. A case study shows that urban municipalities such as Rangist City and Chiang Mai City were able to deploy a faster and more effective response than the national government after the outbreak and the first wave of infections. These two municipalities redirected the objectives of the projects eligible for the LHSF towards measures aimed at contributing to the fight against COVID-19. Rangist and Chiang Mai focused their first efforts on communication campaigns. Local expenditure were also quickly mobilised for the acquisition of medical equipment (masks, goggles), the adoption of distancing and protection measures on the road and public transport, and a door-to-door programme to provide care to the elderly.

EMERGENCY MEASURES TO COPE WITH THE CRISIS AT THE DIFFERENT LEVELS OF GOVERNMENT: All financial aids and measures to support businesses and households came from the central government. As of June 2021, the Thai government had rolled out a three-phase tax relief package equivalent to about 9.6% of national GDP (approximately USD 45 billion PPP). Although this had a negative impact on the 2020 fiscal balance, in 2021 the aid was significantly reduced and this made it possible to partially regain stability in the fiscal balance. The announced package included in its first phase an increase in public spending on health, cash transfers to families, temporary workers, freelance workers and other individuals at risk, as well as soft loans and tax relief for individuals and businesses equivalent to more than 2% of the GDP. The package contemplated reductions in water and electricity bills, as well as in social security contributions and support measures for the tourism sector. To finance all these measures, the parliament authorized the national government to contract extra debt for up to 5.3% of GDP. As of March 2021, more than half of the Thai population had received some form of financial assistance from the government, as 89% of the fiscal aid package was already disbursed.

Despite recent changes in the levels of autonomy of subnational governments to make fiscal decisions, as well as the discretionary availability of emergency fund resources, provinces and local governments in Thailand did not play a significant role in the deployment of emergency measures, nor economic and social stimulus. Most of the measures adopted by subnational governments have been limited to addressing the health crisis, for which they have played an important role, based on the experience of villages and municipalities in the management of prior viral outbreaks. The first measures adopted by subnational governments in the face of COVID-19 in Thailand were all in accordance with the Emergency Decree issued by the national government in March, including the restriction of movement or access to public places, control over certain locations with high risk of transmission, and the mandatory requirement to wear a mask in public places. Also, some local governments in collaboration with their provincial governments established surveillance, measurement and tracking points to monitor the flow of people in their territories.

IMPACTS OF THE CRISIS ON SUBNATIONAL GOVERNMENT FINANCE: The impact of the crisis unleashed by COVID-19 in Thailand was rather strong and caused a contraction of the national economy by 6.1% in 2020, in contrast with 2.3% growth registered in 2019. At the subnational level, the impact was mainly noticeable on subnational government revenue, which fell by 7% between 2019 and 2020, also in line with a drop of 7% in the general government revenue. In this area, while grants and subsidies from the central government increased by 2%, subnational government tax revenue fell by 20% and revenue from tariffs and fees also decreased by 25%. Tax collection was mainly affected by a 6% drop in revenue from VAT transfers and a stark 84% drop in property tax collection, due to the relief measures implemented by the national government to support businesses and households.

On the other hand, in the area of ​​expenditure, subnational governments registered an increase of 4% (while there has been a 15% growth of expenditure at the general government level), which reflects the centralisation of public spending. One of the aspects most affected by the low growth in public spending was the payment of compensation to the staff, which fell by 11%. On the other hand, there was an increase of 14% in local public investment, specifically in direct investment. To support government borrowing throughout the pandemic, Thailand has increased the ceiling of its public debt-to-gross domestic product (GDP) ratio to 70% from 60% (for the general government debt).

ECONOMIC AND SOCIAL STIMULUS PLANS: In April 2020, the central government approved a USD 57 billion recovery package (12% of the GDP) to reinvigorate the domestic economy. This package included measures on healthcare and economic stimulus for up to USD 31 billion (7% of the GDP) and a USD 11 billion (2.3% of the GDP) economic development plan to improve productivity and strengthen the domestic economy in the long term.

In response to the economic contraction caused by the impact of COVID-19, in April 2020 the Government of Thailand announced a plan for public-private partnership projects with a total value of USD 33 billion. This plan, which replaces the PPP Strategic Plan 2017-2021, will be implemented between 2020 and 2027 and include a total of 92 projects in priority areas for economic reactivation.