Our observations also have implications for local public finances in Thailand. At present, taxes
imposed by the central administration in Thailand are mainly levied on income (individual and
corporate income) and consumption (VAT, excise taxes, Special Business Tax, and tariffs) while local
governments’ sources of tax revenue are mostly property and hotel usage. Our results indicate that
local wages respond more sensitively to differences in local infrastructure than land prices. Most local
public goods (except for schools) have, however, traditionally been provided by the national government in Thailand and have thus been financed to a considerable degree by the national wage tax.
As wage earners seem to be both the beneficiaries and the financiers of local public goods, the Thai
tax system in this respect seems to follow the benefit principle of taxation. Local public goods
contribute to their own financing: by increasing wages, they expand the tax base from which they are
financed.