Over the past decade, many people may have heard about PISA, the Programme for International Student Assessment, which requires 15-year-old students to undergo evaluation. But have you ever wondered where this standard comes from? Or even in 2023, multinational companies worldwide were alert to new tax collection standards, where the Global Minimum Tax Rate for corporate income tax was set at 15%.
We will introduce you to another important international cooperation organization: “OECD” – the Organisation for Economic Co-operation and Development, which initiated PISA and the Global Minimum Tax Rate, as well as other international standards that various countries, including Thailand, have adopted to elevate national development to international standards.
Do you know how OECD differs from other international organizations? Many organizations such as the IMF or World Bank are primarily organizations that provide financial support. Meanwhile, OECD is an organization that focuses on sharing best practices or establishing standards for us to follow. It could be called a Think Tank that brings together experts and knowledge repositories across various fields for countries to seek consultation and knowledge to solve problems. This represents the concept of creating sustainability, comparable to teaching someone to fish rather than giving them fish, so they can learn the method themselves. This is a key point that makes OECD different from other international cooperation organizations.
Getting to Know OECD
OECD (Organisation for Economic Co-operation and Development) is an international organization that plays an important role in creating and exchanging best practices to promote economic prosperity, security, equality, and better living standards for various countries, according to the vision “Better policies for Better Lives.” It originated from the Marshall Plan in 1948. OECD was originally called OEEC (Organisation for European Economic Cooperation), established to restore Europe’s economy after World War II. Later in 1961, it was renamed to OECD.
Currently, OECD has 38 member countries, with Costa Rica being the latest member. OECD headquarters is located in Paris, France, and has 4 regional offices: Berlin (Germany), Mexico City (Mexico), Tokyo (Japan), and Washington
D.C. (United States). OECD’s organizational management is divided into 4 groups:
1. OECD Council consists of representatives from member countries, representatives from the European Union, and the OECD Secretary-General as chairperson. The Council oversees and sets the organization’s direction using consensus decision-making mechanisms.
2. OECD Committee consists of over 300 sub-committees covering all sectors, responsible for discussing, creating, and reviewing policy guidelines, including impacts from policy implementation, while disseminating knowledge and policy experience through collaboration with experts, working groups, and directorates.
3. OECD Secretariat consists of directorates with over 3,300 staff members, responsible for collecting data and presenting analytical results along with policy recommendations to support committee discussions as directed by the Council.
4. Policy design and development groups consist of representatives from government, business, labor, civil society, and academic sectors working together to provide recommendations and exchange various matters with the Secretariat. They also create good participation by seeking opinions from diverse sectors for use in formulating and designing policies that are beneficial and comprehensively inclusive.
Thailand-OECD Cooperation History
Looking back to 2000, Thailand began cooperation with OECD in a project called “PISA” (Programme for International Student Assessment), an international student competency assessment program aimed at evaluating the quality of education systems in various countries in preparing youth with essential capabilities for living in a changing world. It focuses on assessing students’ competencies in applying knowledge and skills in real life, divided into literacy assessments in reading, mathematics, and science. This assessment provides tests for sample groups of 15-year-old students, who are at the age of completing compulsory education and ready to grow into quality citizens. The results are used as a measure of the country’s education quality to determine how we should improve and develop education policies and curricula. The Institute for the Promotion of Teaching Science and Technology (IPST) has published sample PISA questions on its website for interested parties to practice.
Besides educational practices, there are other OECD principles and recommendations that Thailand has adopted for policy formulation or as standards for related operations, such as Responsible Business Conduct (Responsible Business Conduct or “RBC”). Since traditional business operations often lack monitoring and oversight, they face problems with bribery, exploitation of workers and consumers, and environmental pollution. OECD therefore established the standard “Due Diligence Guidance for Responsible Business Conduct,” which helps companies following these practices to anticipate, prevent, or reduce negative impacts that may occur, supports companies in contributing to society, helps develop stakeholder relationships, and protects the company’s reputation. Additionally, it can help increase company value and strengthen risk management capabilities in operations, enabling companies to decide on future business directions.
Another matter is Global Minimum Tax, a principle developed by OECD to address tax loopholes, and Thailand is also facing this challenge. This arises from multinational businesses selling goods and services in various countries through online systems, especially in the current era where online business operations have become much more convenient, without needing to establish companies or offices in destination countries. This causes those countries to lose opportunities to collect income tax from foreign businesses generating revenue from sales in their countries. This principle proposes international tax system reform by requiring large multinational companies to pay income tax at an effective tax rate of no less than 15%, divided into 2 main approaches:
Pillar 1: More equitable allocation of profits and taxation rights for large multinational companies
Pillar 2: Collection of a 15% minimum corporate income tax rate from large multinational companies to reduce tax competition between countries
Strengthening Relations between Thailand and OECD
Besides adopting OECD’s standards and best practices in various areas, Thailand and OECD have important cooperation through the “OECD-Thailand Country Programme (CP)” project, which is Thailand’s cooperation with OECD in various sectors. This project is divided into 2 phases:
Phase 1 from 2018-2021 involved joint operations in various areas including: promoting public sector governance, promoting business sector competition, Thailand 4.0, and inclusive and comprehensive growth.
Phase 2 from 2023-2026 focuses on operations similar to Phase 1, namely governance and business sector competition, with new areas replacing others: social inclusion and human capital development, and green recovery.
Results from the Country Programme implementation have brought Thailand benefits in many areas, including Thailand receiving support for endorsement of OECD Legal Instruments to elevate Thailand’s standards to international levels. In the future, we may hear the term “legal instruments” more frequently. Legal instruments here refer to rules, regulations, or practices established by OECD, divided into 2 types: legally binding instruments and non-legally binding instruments. Legally binding ones are regulations that member countries must implement due to specific rights and obligations involved. Non-legally binding ones are practices that do not require member countries to implement, but are equally important since OECD member countries use these instruments as operational principles within their countries, making OECD an international organization with world-class standards today.
Additionally, Thailand has received support for preparing policy studies and analyses (Policy Reviews) covering various sectors, supporting participation of Thai agencies in OECD as members or observers in relevant committees to exchange best practices, organizing workshops, seminars, and training for Thai agencies, and sending Thai officials for secondment at OECD headquarters in Paris to learn operations and exchange relevant experiences.
Not just Membership, but for Better Quality of Life
In 2022, the Thailand Development Research Institute (TDRI) conducted the “Study and Research Project on the Appropriateness of Thailand’s OECD Membership.” The study found that if Thailand becomes an OECD member, Thailand’s GDP rate would increase by approximately 1.6%, domestic investment would increase by 25.7% (3.41% of GDP), foreign capital would increase by 18.7%, exports would increase by 4.93% (1.56% of GDP), while imports would also increase by 12.46%, requiring Thailand to adapt to increased market competition. Based on these statistical data, we can conclude that Thailand will definitely benefit from OECD membership, leading to Thailand’s decision to apply for OECD membership.
Currently, Thailand is in the OECD membership accession process with the status of an accession candidate country and has already received the Accession Roadmap . Although Thailand is not yet an OECD member, being in the process of implementing the accession roadmap will further support Thailand’s operations to align with OECD best practices, which will help promote national reforms in various areas to meet OECD standards and move toward full OECD membership in the future.
You can follow Thailand’s progress in OECD membership at the website https://inter.nesdc.go.th/oecd/ or scan via QR Code
