LTF tax privileges face uncertain future
The Association of Investment Management Companies (AIMC) is set to discuss with the Revenue Department if tax privileges for investments in long-term equity funds (LTFs) will be extended after they expire in 2016.
The meeting is expected to take place after April, said the AIMC’s newly appointed chairperson Vorawan Tarapoom, who is also chief executive of BBL Asset Management.
“LTFs are on the front burner when we talk with the Revenue Department. The association must make the department conform to the same view. Many people think such funds only benefit the rich, but that’s not true as more middle-income earners have also showed interest in putting money in these funds after they learn more about their privileges,” she said.
Tax allowances for investments in LTFs and retirement mutual funds (RMFs) became effective in 2002 under Thaksin Shinawatra’s administration, aiming to encourage local investors to put their money in the stock market to shore up the falling market at that time.
Individual tax payers can deduct contributions of up to 15% of their annual income or 500,000 baht, whichever is lower, for investments in LTFs. They can also claim a tax deduction of up to 15% of their annual income for investment in RMFs, but not exceeding 500,000 baht, when contributions to provident or pension funds are included.
Investments in LTFs have played a vital role in the Thai stock market, as some 200 billion baht is parked in these tax-sheltered funds, said Ms Vorawan, adding that volatility in the local equity market will be high if the tax incentives for these funds are not extended.
The association said it has back-up plans if the Revenue Department refuses to extend tax breaks for LTF investments.
The department implied it would not extend the tax allowance for LTF investments as they no longer help boost savings, and the department is under pressure to find more sources of tax income following cuts in the corporate tax rate.
Ms Vorawan forecast the mutual fund industry will grow 10% this year, gaining even more if political tension eases.