New rules could benefit taxpayers

Some 5 million taxpayers could enjoy higher benefits if the government were to raise the maximum qualifying percentage for investment in retirement mutual funds (RMFs) and long-term equity fund (LTFs) from the current 15 per cent of taxable income.

However, only about 200,000 taxpayers would benefit from a higher tax break should the government choose to increase the ceiling investment amount from the current Bt500,000 a year, Voravan Tarapoom, chairman of the Association of Investment Management Companies, said yesterday.

The Finance Ministry early this week floated the idea of raising the ceilings for tax breaks for investment in LTFs and RMFs until the end of the year, in a bid to shore up the stock market.

It is unclear at the moment, however, whether it will raise the 15-per cent ceiling or the Bt500,000 investment cap.

According to the 2004 database, there were 7.32 million payers of income tax in the country. Some 240,000 of them, or 3.3 per cent, earned Bt3.33 million or more each per year and were eligible to enjoy the maximum tax benefit from LTFs and RMFs.

This group of taxpayers have the capability to increase their investment in the funds, which will help boost the equity market, Voravan said.

"Meanwhile, about 5 million taxpayers, representing 95.4 per cent of overall taxpayers, are eligible to receive more tax benefits should the government allow them to invest more than 15 per cent of their income," she said.

However, many in this second category also have to pay home-loan instalments at about 33 per cent of their income, and may therefore not be able to invest at the maximum level in RMFs or LTFs even if the extended benefits became available. At the end of September, the net asset value (NAV) of equity funds in the country was Bt146 billion, up 10.73 per cent from Bt132 billion at the end of last year.

The NAV for RMFs and LTFs was Bt81 billion, down 7.82 per cent from Bt87 billion at the end of last year.

The NAV for fixed-income funds stood at Bt974 billion, 2.47 per cent higher than Bt951 billion at the end of last year, while that for mixed funds was Bt197 billion, down 19.76 per cent from Bt245 billion.

Foreign investment funds' NAV was Bt357 billion, soaring 70.54 per cent from Bt209 billion at the end of last year.

Other kinds of funds' NAV amounted to Bt261 billion, down 7.62 per cent from Bt283 billion. The total NAV for the funds industry, which contained 1,098 funds at the end of September, was Bt1.58 trillion. This compares with 910 funds with an NAV of Bt1.61 billion at the end of last year.