The result demonstrates that an increase in VAT from 7 to 10 percent generates an increase in public welfare and decrease in household utility. In addition, this policy leads to an increase in prices and decrease in outputs in many sectors. At the same time, it has a favorable effect on some sectors that cause an increase in both output and prices. For energy sectors, only output in other petroleum product sectors increases, whereas the prices in petroleum refineries and electricity sectors increase. The elimination of VAT enhances economic growth in almost all sectors, especially in the petroleum refineries sector, agriculture sector, and petroleum and natural gas sector, relative to the benchmark case. Furthermore, zero percent VAT increases the price of capital in all sectors by 0.0060 percent. Although this policy accelerates household utility, it reduces public welfare.
The advantage of an input-output table is it represents a snapshot of the economy at one point in time that one can use to develop models to evaluate the change in economy or the impact of policy such as Bergman (1990), Semboja (1994), Xie et al (2000), Dellink et al (2004), Bhattarai (2007, 2011, 2016), and Ruamsuke et al (2015). However, input-output tables have two main assumptions: fixed technical coefficients, and fixed input proportions. Therefore, they are suitable for explaining the current situation and making short-term predictions for the economy.
Keywords: General Equilibrium, Tax Policy, VAT, Thailand