Thailand Offers Tax Breaks to Boost Bangkok’s Stock Market
Bangkok—To bolster its struggling stock market, the Thai government announced a series of tax incentives designed to attract investment in environmentally and socially responsible companies. Finance Minister Pichai Chunhavajira unveiled the plan on Tuesday following a cabinet meeting. The plan offers individuals investing in new “ESG X” funds tax allowances of up to 300,000 baht. This initiative follows a more than 15% plummet in Thailand’s benchmark SET Index this year, pushing it near a five-year low. This decline is attributed to weak economic growth, disappointing corporate earnings, and a persistent outflow of foreign investors.
These ESG X funds, scheduled for launch by June, will focus on shares of local companies demonstrating strong environmental, social, and governance (ESG) performance. This strategy reflects a global trend toward sustainable investing, prioritizing companies committed to ethical practices and long-term sustainability. The government expects this to stimulate market activity and encourage companies to adopt more responsible business practices. While the Ministry of Finance projects a potential 50 billion baht loss in tax revenue due to the incentives—as confirmed by Fiscal Policy Office Director-General Pornchai Thiraveja—the government believes the long-term benefits of a revitalized stock market and a stronger emphasis on ESG principles will outweigh the short-term fiscal impact.
The incentive package also extends to existing holders of long-term equity funds, estimated at approximately 180 billion baht. These investors will be incentivized to transition their holdings into the new ESG X funds, receiving even larger tax breaks of up to 500,000 baht. A five-year lock-up period is included to prevent a sudden surge of selling pressure should these funds mature and be redeemed. This approach aims to stabilize the market while encouraging a shift toward more sustainable investment options.
The government’s efforts extend beyond tax incentives. Recognizing the negative impact of market irregularities on investor confidence, Mr. Chunhavajira also announced plans for a new decree to strengthen the crackdown on malpractice in stock trading and corporate governance. He emphasized that swift action against such irregularities is crucial for restoring trust in the financial markets and attracting both domestic and foreign investment. This dual approach—incentivizing responsible investment while strengthening market integrity—highlights the government’s commitment to creating a sustainable and robust financial ecosystem.
These measures build upon previous efforts. Last year, Thailand implemented similar tax breaks and reduced lock-up periods for individuals investing in ESG funds. However, the scale of the current incentives reflects a more forceful response to the market’s persistent downturn. Global trade tensions and rising market volatility present significant challenges for export-oriented economies like Thailand, further underscoring the urgency of these measures. Prime Minister Paetongtarn Shinawatra has called for closer cooperation between policymakers to bolster the nation’s economic growth, highlighting the government’s concerted effort to navigate these turbulent times and secure a more stable financial future. The success of these measures remains to be seen, but they represent a significant step by the Thai government to address the current market downturn and promote a more sustainable investment landscape.
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