Educational Finance in Thailand - UNESCO Bangkok

Final Report, Volume II/3 Anthony. Cresswell: Educational Finance UNESCO-PROAP TA 2996-THA
Education Management and Finance Study July 1999
b. There are two major deficiencies with voluntary mechanisms to be effective.
First, the economic incentives for voluntary contributions have undesirable effects
on resource allocation and equity. To be effective voluntary mechanisms require
some incentive for the private individual or organization to contribute resources to
education. These may be economic incentives, such as reduced tax liability, or
investment in their own or a family member’s human capital and future income
potential. Or the incentives may be non-financial, such as a desire to help children,
improve a community or society in general, or express religious beliefs.
Government policy is not likely to have much impact on the non-financial
incentives, so is not analyzed here. The tax-based incentives in the current new
policy proposals (Education Bill) do not represent a savings to the government
since they are tax credits; each Baht of contribution represents a Baht of revenue
loss. These incentives simply shift the control over where the government
resources are allocated from the government itself to the individual contributor.
This can be an effective incentive, since it allows a person or organization to
allocate government resources in a way to produce personal benefits. It is also a
disequalizing mechanism, since richer persons have more discretionary funds to
take advantage of this incentive, and may be taxed at higher rates than the poor.
c. The second problem with mobilizing private resources is that it introduces
potentially high levels of uncertainty into the financing of essential government
services. Voluntary contributions can vary greatly from year to year, as the school
survey results reported above show. This can create planning problems and
inefficiencies in local school management. If the revenue flow from the private
sector is irregular, it cannot be used to support services that require regular
expenditures, such as staff salaries, utilities, routine supplies and activities, etc.
Therefore the support for these basic operations must come predominately from
regular sources--either regular appropriations, or stable income from investments.
Irregular revenues will thus be used for special projects or investments, or be used
in unplanned and possible inefficient ways. This is not a sound foundation for
provision of education.
3.2.3. Financial allocation mechanisms
Based on this administrative structure, there would be three normal government
revenue streams into the schools. The first would be the basic subsidy from the
central government, in the form of block subsidies based on the student count. The
school's revenue from this source would, thus, depend on the number of students
who maintain effective enrollment in any given year and on the size of the perstudent
guideline. The size of the subsidies would be a uniform per-student
amount. It should be fixed through an annual policy decision that reflects the
central government’s responsibility relative to the share of tax revenues it collects.
That is, if the central government continues to collect the largest proportion of
total tax revenues, as through the VAT, etc., then its educational subsidy
responsibility should be correspondingly large.
96