The Finance Ministry plans to call for a new individual savings account (ISA) as a tax-deductible savings instrument to replace the retirement mutual fund (RMF) and long-term equity fund (LTF) schemes.
Speaking during a keynote speech titled “The Next New Economy” hosted by Thai Rath newspaper, Finance Minister Ekniti Nitithanprapas said the ministry will introduce a new savings mechanism to replace LTFs.
The proposed ISA is meant to be an investment vehicle that does not distort the market structure.
Under the current tax-deductible savings schemes, the main beneficiaries are high-income earners in the 30-35% tax brackets, said Mr Ekniti.
The Revenue Department loses roughly 20 billion baht a year in tax revenue from deductions related to LTF investments, of which around 16 billion baht benefits taxpayers in the highest income brackets.
In addition, requiring savings that qualify for tax deductions without allowing individuals to make their own investment choices, such as with LTFs, has sometimes resulted in losses and distorted market mechanisms, he said.
An ISA allows individuals to make their own investment choices within a set ceiling, covering specific stocks or bonds as they create a personalised investment framework. This eliminates the need to constantly introduce new products such as LTFs, RMFs or ESG funds, which often overlap.
All these investments would be consolidated under a single umbrella, giving people greater flexibility, as some may prefer to invest in government bonds, while others may want higher risk such as equities or overseas investments.
The ISA gives individuals full freedom to choose their own investment products, said Mr Ekniti.
“When LTFs were introduced, everyone rushed to buy them just for tax benefits, but later the fund performance turned negative,” he said.
“If people can choose where to invest by themselves, the outcomes would better reflect their risk appetite and interests.”
Mr Ekniti said a new savings option offering investment in government bonds would create a mechanism allowing monthly purchases.
This would provide a secure savings option, especially for retirees, many of whom keep their money in low-interest savings accounts that yield only 0.25%, he said.
Although the returns from government bonds may be only slightly higher than those from bank savings accounts, they offer a much higher level of security and stability, said Mr Ekniti.
Regarding the Thai economy, he said the government plans to implement stimulus measures to prevent the economy from “falling off a cliff”, as growth has begun to lose momentum.
In the first quarter this year, the Thai economy expanded by 3.2%, followed by 2.8% in the second quarter, with projections for 1.7% growth in the third quarter.
For the final quarter, economic growth is estimated to slow sharply to merely 0.3%, said Mr Ekniti.
“We must act to stop the Thai economy from slowing further, because if this contraction continues, it will become increasingly difficult to revive the economy in the future,” he said.