Fiscal Decentralization and Intergovernmental Transfer in Thailand

Abstract

Decentralization in Thailand occurred hastily and remains relatively untested after the promulgation of the 1997 Constitution. The decentralization act of 1999 mandated the government to transfer revenue to LAOs, reshaping local fiscal structures. The government has successfully provided revenue to local governments as required by providing large share of intergovernmental revenue transfer in form of tax sharing and grants transfer. A consequence of this, however, is that intergovernmental transfer of revenue has led to lower local fiscal accountability. The tasks that need consideration for continuing fiscal decentralizing in Thailand are: clarifying expenditure assignment for each level of LAOs since there is a two-tier system of LAOs administration; encouraging efficient revenue generation in the existing revenue structure including designing proper intergovernmental revenue transfer formula which would reflect benefit and cost of local public service to enhance accountability of local people toward each level of LAOs. Furthermore, decentralization in Thailand needs to promote participation from local people to understand role of LAOs under the new paradigm of public service delivery where the people must take a proactive role in decision making that concerns their welfare and local affairs.