Somkid supports LTF perk continuity
Ultimate decision rests with Finance Ministry
Deputy Prime Minister Somkid Jatusripitak has voiced his support for long-term equity funds (LTFs) to continue but says the extension of the tax privilege for LTF investment must be approved by the Finance Ministry.
LTFs should be protected because they represent an investment foundation for the public, Mr Somkid said.
Extending the tax deductions for investment in LTFs will depend on the Finance Ministry, he said. Mr Somkid has already discussed the issue with Finance Minister Apisak Tantivorawong.
Regarding a proposal from the Federation of Thai Capital Market Organizations (Fetco) to set up a new investment fund as a substitute for LTFs, the Finance Ministry has been tasked with assessing the matter to determine its suitability to the current environment and whether it will provide long-term investment opportunities for both youngsters and the elderly, Mr Somkid said.
"The ministry will consider whether to extend the tax privilege," he said. "Fetco's proposal has been given a special assessment [by the ministry], but it's not an urgent subject, as the [tax deduction] on LTF [investment] will expire in 2019," he said.
Stock Exchange of Thailand (SET) president Pakorn Peetathawatchai said the question is how to encourage people to invest in the newly proposed fund, which targets 50% of investment in infrastructure funds and stocks associated with the SET's Thailand Sustainability Investment.
A man browses a board listing LTFs' performance at the SET in the City 2018, which runs until Sunday at Royal Paragon Hall. SOMCHAI POOMLARD
Fetco recently proposed to Mr Somkid a new investment fund to replace LTFs, with a 10-year investment period and tax credit of about 20% of the total investment sum. The tax credit will be capped at 100,000 baht.
The move is aimed at encouraging greater long-term savings among Thais and reducing healthcare spending by using the government budget in the future, said Fetco chairman Paiboon Nalinthrangkurn.
There have been divided opinions on extending tax privileges for LTF investment, with fears of huge capital outflows moving out of Thailand's stock market if tax deductions for LTF investment are not renewed or a replacement tax-deductible fund is not established.
The cabinet in late 2015 approved an extension of tax incentives for LTFs for three more years from 2016 to revive waning stock market sentiment and boost savings.
Taxpayers are permitted to deduct contributions to LTFs and retirement mutual funds worth up to 500,000 baht each, or no more than 15% of annual taxable income, whichever is lower.
To obtain the tax deduction, individuals must hold LTF units for at least seven calendar years and must not be incapacitated or dead.
Separately, Mr Somkid has ordered the SET to develop greater digital adoption in 2019 and has set a goal for Thailand to become Asean's capital market hub in the next five years.
The government will fully support the SET by unlocking regulatory barriers and help the bourse transform into a digitised stock exchange, Mr Somkid said.
The SET should also digitise and connect with the Hong Kong Stock Exchange and other stock markets in China to expand investment products and the investor base, he said.
"We have already overcome Singapore in terms of trading liquidity and IPO fundraising," he said. "We plan to become a regional capital market hub in the future by connecting with neighbouring stock exchanges, the Hong Kong Stock Exchange and other stock exchanges. A digitised trading platform and new trading applications are needed."