THAILAND

The Association of Investment Management Companies (AIMC) has called on the government to extend the tax privilege for investments in long-term equity funds (LTFs) that will expire in 2016, citing a possible impact on the stock market's expansion.

LTF investors can deduct the investment amount up to 15% of their personal incomes but not more than 500,000 baht. The measure is aimed at promoting equity investment, personal savings and activity in the stock market.

Since the measure will expire in four years and the Finance Ministry is working on the country's tax reforms, the time is right to consider extending the tax break, said Sathapana Leoprapai, the AIMC's chief executive.

Some tax privileges promoting stock investment including mutual funds will be reviewed, and some may be eliminated if they overlap with others.

A recent case in point is the proposal of the market to waive the withholding tax on dividends on the ground that dividend-paying companies have already paid corporate tax on their profits.

Mr Sathapana said recent rumours that the ministry may not extend the LTF tax privilege have worried the market.

"LTFs are the first step for new investors, mostly salary earners, to learn how to invest in the equity market. If the tax break is scrapped, they may not be interested in investing in mutual funds, making it hard to expand the number of stock investors. It will also affect the growth of the mutual fund business, equity markets, and the Stock Exchange of Thailand," said Mr Sathapana.

He said the mutual-fund market may have peaked with only slight growth seen in the past few years due to competition from banks deposits, which target the same customer groups.

"The only way to spur the mutual fund business growth is to expand the customer base to such groups as first jobbers and educate them about investment and financial planning," he said.

For five years, the industry has shown flat growth.

At the end of last year, there were 2.72 million mutual-fund accounts, up from 2.46 million in 2010.

The total assets of the industry represented 20.39% of the country's gross domestic product, a slight increase from 20.11% year-on-year.

Mr Sathapana said the combined net asset value of mutual funds stood at 2.08 trillion baht, up by 2.48% from the previous year's level. Equity funds contributed about 22% of total mutual fund asset size, fixed income funds 60% and property funds 5%.