Options weighed for LTF incentive
Reworking investment requirements for tax-saving long-term equity funds (LTFs) by either extending the lock-up period or lowering the amount of tax allowance are the probable choices if the Finance Ministry decides to renew the tax incentive.
The present incentive will expire in 2016. Kritsada Jinavijarana, director-general of the Fiscal Policy Office (FPO), has repeatedly said no decision has yet been made on whether the tax allowance for LTF investment will be extended.
The FPO is weighing the pros and cons of renewing the tax privilege, he said.
The tax deduction has been criticised for benefiting mostly high-income earners. But the Federation of Thai Capital Market Organizations (Fetco) insists the investment can encourage savings, help to develop the local capital market and strengthen institutional investors to serve as a buffer amid steep stock market falls.
The ministry recently said some LTF investors held units for slightly more than three full calendar years, buying them near the end of the year and redeeming them early in the fifth year, a practice that does not encourage savings.
Taxpayers now can deduct contributions of up to 15% of their personal income or 500,000 baht, whichever is lower, for investment in LTFs. As of June 20, net assets of LTFs were valued at 2.34 billion baht.
Outgoing Fetco chairman Paiboon Nalinthrangkurn recently said taxpayers, mostly middle-income earners, held 1 million LTF investment accounts, a small number compared with the 40-million-strong workforce. Middle-income earners making 300,000 baht a year are the biggest beneficiaries. They can save up to 30% from their tax obligations if they invest the maximum amount, while high-income earners making 10 million baht save a mere 6%.
Mr Kritsada said the FPO would also consider a new tax-saving fund proposed by Fetco meant to replace LTFs. It would be more diversified than just LTFs, investing in infrastructure funds and government bonds as well as stocks.