The Fiscal Policy Office (FPO) may renew tax benefits for long-term equity fund (LTF) contributions, set to lapse at year-end, if the funds can be used to reduce income disparity and raise cash for big-ticket infrastructure investment.
LTFs were designed to help save for retirement and create stock market stability, but they play less of a role in balancing the equity market because the local bourse is significantly bigger than it was in the past, said Lavaron Sangsnit, director-general of the FPO.
The office listened to the Federation of Thai Capital Market Organizations' request to review the expiry of tax perks because LTFs still contribute about 70 billion baht a year, Mr Lavaron said.
If LTFs can address income inequality and become a fundraising source for infrastructure investments or small and medium-sized enterprises (SMEs), the FPO will support the tax benefit extension, he said.
For instance, LTFs might set a clear ratio for investment in SMEs such as 30-50% of the fund's net asset value.
He said the personal tax deduction for LTFs could be viewed as favouring high-income earners because they can save more on taxes than low-income earners.
LTFs were set up in 2004 to promote long-term savings by allowing investors to deduct up to 15% of their total annual income or a maximum of 500,000 baht a year, whichever is lower. Capital gains from the redemption of units are also exempt from tax.
The cabinet in late 2015 approved an extension of tax incentives for LTFs for three years from 2016 to revive waning stock market sentiment and boost domestic savings, but the lock-up period was lengthened.
To obtain the tax deduction, individuals must hold LTF units for at least seven calendar years, up from the previous five years. Mr Lavaron said the seven-year requirement will remain if the tax incentive is extended.
