Estimation of Effect to Welfare and Labor Supply of Income Tax Reform in Thailand: Microsimulation Approach using Household Micro Datasets

Abstract

In recent years, microsimulation, which is simulation analysis using microdata, has been used to evaluate policy reforms in many countries. However, the literature on microsimulation that considers changes in individual household behavior is limited, especially for developing countries. Therefore, this study examines the change of welfare and labor supply under the simulation scenarios of income tax reform in Thailand using microsimulation. The contribution of our study is that it is among the first to apply microsimulation to analyze the personal income tax reform of a semi-developed country like Thailand. Our simulation analyses suggest an intriguing possibility that the tax revenue could be more than double without utility loss and a high fluctuation of the income after-tax. The tax reform is now in progress in Thailand. Hence, this study has reform implications for the government.