Stock Exchange of Thailand chairman Sathit Limpongpan wants the Finance Ministry to rethink its plan to abolish the tax deduction for buyers of long-term and retirement mutual funds and collect more taxes from high-income earners.
Sathit said if the ministry needed to have more tax-collection channels, it should target high-income earners as most buyers of long-term (LTF) and retirement mutual (RMF ) funds were middle-income earners and the funds helped raise institutional investor investments which strengthened capital markets.
‘Explore other ways’
“Such a [tax] privilege should not be cancelled. Other ways [of collecting taxes] that do not have an impact on capital market investment should be explored,” Sathit said.
“[Tax] loopholes on very high income earners should be closed and tax collections on this group should be fully done.”
If the tax deduction on LTFs were not extended beyond its expiry date of 2016, there would be no new investments in the country after 2016 and the existing capital of between Bt50 to Bt60 billion per year may be moved out of the country over a four-year period, he said.
Pongpichet Nananukool, managing director for Kasikorn Asset Management, said LTFs worth Bt230 billion and RMFs worth Bt150 billion were invested in Thailand and each year about Bt50 billion in LTFs and Bt20 billion in RMFs poured into the country.
“That [the scrapping of the tax] may not affect the stock market, given its [the funds] gradual movement out of the stock market,” he said.
“Brokerage houses may see losses in their trading fees.
“All capital market operators and investors may have to make adjustment.”
About half of the LTFs may be moved into other assets, he said, adding Kasikorn Asset Management would change its LTF policy to a normal one.
“The company is a leader in the LTF market. However, we are confident there will be no impact and investments in LTFs will be retained,” he said.
One Asset Management chief executive Win Udomrachtavanich believes the number of institutional investors, who accounted for about 13 per cent of the total investors, would drop by about 3 per cent if the LTF and RTF tax privilege was abolished.