Two hundred plants per rai

There is a banana grove in central Bangkok, on land worth more per rai than most people will earn in a lifetime, and it is there for tax reasons.

This is entirely legal. It is avoidance, not evasion: the landowner is complying with a published rule, in a way the rule permits, and nothing in this article suggests otherwise. What is interesting is why the rule permits it, because the reason is not carelessness.

The arithmetic

The Land and Building Tax Act B.E. 2562 taxes land according to what it is used for.

Agricultural land: 0.01% to 0.10%.

Vacant or unused land: 0.3% to 0.7%, and if it stays unused, the rate rises by a further 0.3% every three years.

At the extremes, that is a difference of seventy times. Even comparing mid-band to mid-band it is several-fold, and it compounds on land left idle.

Now apply it to central Bangkok, where a rai can be worth hundreds of millions of baht. The annual difference between the two classifications is a very large number.

And the price of moving from one band to the other is bananas. Published criteria put the threshold at not fewer than 200 banana plants per rai.

Two hundred banana plants cost approximately nothing against the sum at stake. That is the whole story, and everything else in this article is about why a well-drafted statute ended up there.

What the law was trying to catch

The Act was aimed at land-banking.

The problem it was written for is real and expensive: valuable central land held vacant for years, generating nothing, while its owner waits for the price to rise. Article 43 counted sixty thousand empty condominium units; idle land is the same pathology one layer down. It removes supply from a market that needs it, it makes the city less dense than its infrastructure could support, and it produces no employment, no housing and no tax.

The Act’s stated purposes include improving collection and reducing inequality, and taxing idle holdings harder than productive ones is a reasonable way to pursue both.

So the drafters needed to tax speculation.

And you cannot write speculation into a tax statute.

Speculation is an intention. It is a belief about future prices held in somebody’s head. No assessor can observe it, no form can capture it, and no tribunal could adjudicate it without reading minds. A tax law needs a test that a public official can apply from the pavement, consistently, to thousands of plots, without litigation over motive.

So the drafters used the observable thing instead. Use.

Which is a good proxy right up until somebody notices it is a proxy.

The state reasoning from what it can see

articles 119 and 134 found Thais reasoning from bad signals because no better one existed: the car, because there is no driver record; the horn, because nothing else is legible.

This is the same failure, with the state on the reasoning end.

The state cannot see intent. It can see plants. So it taxes plants, and it gets plants.

The land has not changed hands, changed purpose, or entered productive use in any sense its owner cares about. It is still being held for capital appreciation, by the same person, for the same reason, on the same timetable. What changed is that it now satisfies a test.

And here is the design principle underneath, which is worth stating on its own:

A proxy only works if it is expensive to fake.

Article 80 Money you can wear found that gold’s 96.5% purity standard protects the least sophisticated buyer in the market. It works because you cannot cheaply fake purity — the test is real, the cost of defeating it exceeds the gain, so the standard holds.

“Agricultural use” was fakeable for the cost of a few hundred banana shoots against a tax bill in the millions. The proxy cost less to satisfy than to avoid. A test that cheap is not a test; it is a formality with a price list.

Then the state specified it harder

The response was the one you would predict, and it is instructive.

Criteria were tightened: minimum planting densities, crop by crop. Two hundred banana plants per rai. Different numbers for other crops. Thai business press now carries a whole genre of service content answering “which plants, how many per rai, for the lowest tax”, which is itself the clearest possible evidence of what the rule is doing.

Academics have advised the BMA on the problem, and the city has looked at raising land tax rates to counter it.

But specifying a proxy more precisely does not change the behaviour. It changes the compliance.

The land is now held for capital gain with the correct number of banana plants per rai. The intention is untouched. The instrument has become more detailed, the paperwork more exact, and the outcome the same — which is what always happens when you sharpen a proxy rather than replace it.

And now the part that complicates it

I want to give this its due, because a piece that stops at the joke would be missing something real.

Some of it is genuine. Not every plot planted after 2019 is a dodge, some of the produce is actually harvested and sold, and small-scale urban agriculture is not a fiction merely because a tax rate encouraged it.

And even the cynical version has a real externality.

Article 07 Why Bangkok floods — and why it’s mostly not the rain found that Bangkok floods mostly not because of rain but because its drainage was built over — a city partly below sea level, on a slow-falling river basin, with much of its canal network filled in for roads. The single most useful thing an unbuilt plot in that city can do is remain permeable.

A few thousand rai of banana plants, in a city that pours concrete on everything, is accidentally the opposite of paving. It absorbs water. It is cooler than a car park. It is greener than a hoarding.

None of that was anybody’s intention, and it is still true. The tax avoidance is real, the environmental side-effect is real, and an honest account has to hold both.

Which does not rescue the policy. A tax designed to bring land into use has instead produced the cheapest possible simulation of use, and the land is no closer to housing anybody.

What would actually work

Not more precise crop specifications. That road has been travelled and it leads to more precise bananas.

The instruments that address land-banking elsewhere tax the land value rather than the land use — the assessed value of the site, regardless of what is or is not growing on it. A site-value approach does not care what you plant, because planting is not what it measures.

That is a large policy argument with serious opponents and it is not one this article is going to settle. But it is the direction that follows from the diagnosis: if the problem is that use is a fakeable proxy for value-holding, then measuring value rather than use is the structural answer rather than a tighter rule about shrubs.

Common misconceptions

“It’s tax evasion.” It is avoidance. The landowners are complying with published criteria in a way the criteria permit. Whether it defeats the Act’s purpose is a separate question from whether it is lawful.

“The tax difference is small.” Agricultural land is taxed at 0.01–0.10%; vacant land at 0.3–0.7%, rising by a further 0.3% every three years it stays idle.

“Any planting counts.” Criteria specify densities — for bananas, not fewer than 200 plants per rai, with other figures for other crops.

“It’s only a Bangkok thing.” The rate differential applies nationally; it is most visible in Bangkok because that is where idle land is most valuable.

“Tightening the rules will fix it.” Tightening a proxy produces more precise compliance. The behaviour changes when the thing being measured changes.