The cabinet on Tuesday approved a 15% withholding tax on gains from investment in income funds, a move estimated to generate up to 2.5 billion baht a year for state coffers.
The tax is aimed at ensuring fairness among investors, as those who directly buy bonds are now liable for the 15% withholding tax, while those who invest via income mutual funds are not, said Finance Minister Apisak Tantivorawong.
The Finance Ministry expects to fetch annual revenue of 1.6-2.5 billion baht from the 15% withholding tax, Mr Apisak said.
Deputy Prime Minister Somkid Jatusripitak said the 15% withholding tax will not dampen the investment climate of the bond market, as investment is trending upward.
Patricia Mongkhonvanit, principal adviser on strategic tax administration at the Revenue Department, said investment in retirement mutual funds and provident funds remains tax-exempt.
Investors who plough money into income funds, however, are still exempt from the 10% withholding tax on dividends.
Bond issuers must take responsibility for the withholding tax, while mutual fund firms are not liable for filing income taxes, with the exception of funds that receive interest income from overseas bonds, Mrs Patricia said.
To waive the withholding tax for gains from investment in bonds through provident funds, the Revenue Department is in discussions with related agencies, including the Securities and Exchange Commission, the Stock Exchange of Thailand and the Association of Investment Management Companies, to set up an income fund, units for which will only be offered to provident fund holders.
The new tax is estimated to generate 1.5-1.6 billion baht based on only the government bond issuance size, worth about 500 billion baht a year, Mrs Patricia said.
In a related development, the cabinet on Tuesday also approved the withdrawal of cash from Krungthai Bank ATMs by low-income earners who hold welfare cards in order to buy goods from any small-scale retail shop under the government's Thong Fah Pracha Rat scheme.
To access the privilege, however, welfare recipients are required to take part in the training programme organised by the government.
The job training scheme is part of the second phase of the welfare and subsidy scheme for the poor, designed to boost recipients' income and attack the root causes of poverty.
To encourage recipients to take part in the career development programme, the government offers them an additional living allowance of 100-200 baht a month to buy goods at Thong Fah Pracha Rat shops, on top of the 200-300 baht distributed under the first phase, starting from March.
According to Mr Somkid, of the 11.4 million welfare and subsidy scheme recipients, just 4.5 million registered to join job training programmes.
Apart from training, the second phase gives low-income earners better access to financial resources to cover basic needs, including homes, land for generating income and savings for retirement.
Two state-owned banks, Government Savings Bank and the Bank for Agriculture and Agricultural Cooperatives, will provide loans to 2.1 million job training participants. The government has budgeted 35.7 billion baht to fund the second phase, expecting to help 1 million recipients rise above the poverty line this year.
Last August the cabinet approved the first phase of the aid package, worth 41.9 billion baht, for 11.7 million low-income earners.
Under the aid package, the government transfers 200-300 baht a month to each welfare smart card.
Recipients earning less than 30,000 baht a year get a monthly allowance of 300 baht, while those with annual earnings of 30,000-100,000 baht receive 200 baht to buy discounted goods at Thong Fah Pracha Rat shops and other designated stores.
The 11.4 million recipients also get subsidies for inter-provincial public buses, third-class trains, and local public buses and electric trains.
The Finance Ministry reported that the government has already allocated 5.69 billion baht between March and August to finance the second phase. Of the total, 4.86 billion baht was given to low-income earners who earn less than 30,000 baht a year and 826.98 million baht for those who earn 30,000-100,000 baht a year.