KS: Proposed SEF to lose B4.5bn

The investment sum flowing into the proposed sustainable equity fund (SEF) is anticipated to lose about 4.5 billion baht worth of investments made by high-income taxpayers because of the SEF’s lower investment limit compared with long-term equity funds (LTFs), says Kasikorn Securities.

Earlier, the Federation of Thai Capital Market Organisations (Fetco) proposed that the SEF replace LTFs because the tax privilege for the latter is set to lapse at the end of this year.

The lock-in period for the SEF remains unchanged at seven calendar years, and the fund must allocate 65% of net asset value to stocks that meet environmental, social or governance goals, or to government infrastructure funds.

Individual taxpayers are allowed to deduct up to 15% of the total annual income, or a maximum of 500,000 baht a year, whichever is lower, for contribution to LTFs.

Although investment in an LTF is locked in for seven years, in practice buyers only need to hold the units for five full calendar years, buying units as the year-end approaches and redeeming them early in the seventh year.

The main purpose of the proposed new investment fund is to help solve income disparity.

As the buying limit for highincome taxpayers will be capped at 250,000 baht per year compared with the existing limit of 500,000 baht, it’s estimated that the investment sum from this investor group will decline by 4.5 billion baht annually, said head of research Passakorn Linmaneechote.

“The replacement of LTFs by the SEF will have an impact on high-income taxpayers,” he said. “As a result, we estimate inflows into the SEF at around 29.5 billion baht per year, compared with 34-35 billion moving into LTFs in every final quarter.”

Investment sums derived from other investor groups are anticipated to remain unchanged based on a hypothesis of investing in a stable savings rate.

Since the tax privilege for LTF investment is set to expire this year, a hunt for LTF purchases by highincome taxpayers is expected, Mr Passakorn said.

After net outflows of 14 billion baht from the stock market in the first quarter, it’s expected that more than 35 billion baht will flow into LTFs this quarter, he said.

‘‘ The replacement of LTFs by the SEF will have an impact on high-income taxpayers. PASSAKORN LINMANEECHOTE Head of research, KS