The implications for the planned devolution of public revenues in Thailand’s fiscal decentralization
programme are unclear. With mobile tax bases, local benefit taxation (which would, in our context,
require levying local wage taxes to finance local public goods) is generally considered suboptimal
(OATES, 1996). Rather, local revenues should be restricted to locally immobile tax bases and, in the
event of revenues falling short of budgetary needs, augmented by centrally administered matching
grants. On the other hand, our observation that local public provision in Thailand seems to be reflected
in increasing wages indicates that a local wage tax might indeed be a promising tool for local
government finance.