The cabinet has approved the Thai ESG Extra tax-deductible fund to help support the stock market.
Investors are eligible for a total tax deduction of up to 900,000 baht from ESG (environmental, social and governance) funds this year, according to Finance Minister Pichai Chunhavajira.
The measure allows holders of long-term equity fund (LTF) units to switch their investments to the Thai ESG Extra fund this year.
Those who switch are eligible for a personal income tax deduction of up to 500,000 baht per person, structured as follows: 300,000 baht is deductible in the current year, with the remaining 200,000 baht deductible in 50,000-baht annual increments from the second to the fifth year.
Investors who switch must transfer their entire LTF investment to Thai ESG Extra. If they decide not to switch, no action is required.
In addition, investors who wish to make additional investments in Thai ESG Extra can do so, buying up to 300,000 baht more this year. However, investments must be made between May and June to qualify for a personal income tax deduction.
The 300,000-baht investment limit for Thai ESG Extra is separate from the existing Thai ESG fund, which also allows a tax-deductible investment of up to 300,000 baht.
Mr Pichai said the Stock Exchange of Thailand (SET) index was around 1,400-1,500 points 6-7 months ago, but has since fallen to less than 1,200 points due to a lack of confidence regarding short selling and high-frequency trading programs that harm competitiveness.
The bourse has taken corrective measures to address these issues.
He said after the Finance Ministry launched the Vayupak Fund, the SET index rebounded to 1,400 points. However, recent US policies affecting trade partners Mexico, Canada and China have caused significant market declines, with the S&P 500 falling by more than 8%, with a knock-on effect for Thai shares.
According to Mr Pichai, ESG stocks are considered sustainable investments that align with market trends. The ministry said it observed parallel growth for the ESG and technology sectors.
"I believe many people were waiting to see what measures the authorities would introduce. The first step is providing an option for LTF holders, which is why we are proposing the Thai ESG Extra fund," he said.
"LTF holders collectively have 180 billion baht in investments. We see potential for recovery for this group, and dividend yields remain strong. So why not transfer to Thai ESG Extra and gain additional tax benefits as well?"
Meanwhile, Mr Pichai said the Securities and Exchange Commission (SEC) and the SET are preparing measures to enhance regulatory compliance among large companies in the SET100 and SET50 indices.
The duo is also working to forward an emergency decree granting the SEC authority to take swift legal action against listed companies engaging in illegal investment practices that damage investors, especially retail investors.
This decree is expected to be submitted for cabinet approval within two weeks, aiming to restore investor confidence.
Pornanong Budsaratragoon, secretary-general of the SEC, said LTF investors have the option to switch to Thai ESG Extra or retain their current investments.
Pornchai Thiraveja, director-general of the Fiscal Policy Office (FPO), said the Thai ESG Extra measure is expected to result in tax revenue losses of around 50 billion baht over the five-year duration of the scheme.
He said the tax impact assessment is based on the assumption the remaining value of LTFs is roughly 180 billion baht. The FPO estimates 75% or 135 billion baht may be switched to the Thai ESG Extra fund.
Investors are allowed to purchase another 300,000 baht worth of Thai ESG Extra funds this year, which is expected to bring in 30 billion baht more in new investments, according to the FPO.
In total, this would amount to 165 billion baht eligible for tax deductions, noted the office.
SET president Asadej Kongsiri said this year, the market capitalisation of the bourse has declined by 14%, amounting to a loss of 200 billion baht.