Budget Bureau, development council support financial transaction tax
The Budget Bureau and the Office of the National Economic and Social Development Council told the Cabinet they support its decision to start levying a tax on stock trading, which has been exempt from taxation for 30 years, according to reports from the two agencies released Thursday.
The public release of the reports supporting the financial transaction tax followed renewed criticism from the private sector that the tax was poorly timed.
A tussle between the private and public sectors erupted after the Cabinet on Tuesday gave the green light for the Finance Ministry to start collecting a financial transaction tax on trades on the Stock Exchange of Thailand (SET). Trading on the SET has been tax exempt for 30 years.
The Cabinet’s decision, which stipulates that SET investors must pay a tax equivalent to 0.1% of share sales, will take effect 90 days after the draft royal decree issued under the revenue code is announced – likely sometime in the second quarter of next year. However, during the first year, the tax will be only 0.055% of share sales.
After the Cabinet approved the tax, the Federation of Thai Capital Market Organisations reiterated its criticism of the tax, saying it was poorly timed and could undermine the market.
The government responded on Thursday by publicly releasing reports from the Budget Bureau and development council that showed both agencies support for the tax.
In a report to the Cabinet, the development council said the financial transaction tax proposed by the Finance Ministry should be approved and that it would not undermine the SET. It also said the tax would promote fairness and increase the efficiency of the Finance Ministry’s tax collections.
The development council, however, disagreed with the Finance Ministry’s plan to exempt the tax on shares sold by stock-trading funds controlled by the Social Security Office, pension and provident funds.
Such funds should not be encouraged to invest in stock markets because share prices are volatile and, as a result, the beneficiaries of the funds could be damaged.
The Budget Bureau told the Cabinet the financial transaction tax would make tax collection fairer and reduce income inequality.
The Budget Bureau also said the financial transaction tax would have no impact on the development of new products on the SET, dismissing claims from the Federation of Thai Capital Market Organisations that it would.
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Financial transaction tax is poorly timed, industry group warns
