Tax refunds promoted to boost debt market

The Revenue Department wants to promote withholding-tax refunds on debt-instrument transactions, according to Chalongphob Sussangkarn, the finance minister.

The department now charges 15% withholding tax on gains from debt instruments traded in the secondary market, but permits investors to claim tax refunds from the differences between the coupon rates and present yields.

Dr Chalongphob said the ministry wanted to promote tax refunds on debt instruments as a means of developing the debt market.

Currently, the bond market represents just 8% of the private sector's total fund raising, leaving a large room for the bond market to develop, but the government must take the leading role, he said.

Besides the tax refunds, the ministry would also encourage small firms to tap funds from the debt market.

''Up until now, only large firms raise funds from the bond market. Smaller firms are facing obstacles as they need credit ratings at an investment grade. In the future, the ministry might ease the rule to allow smaller firms to issue debt papers,'' he said.
Dr Chalongphob said the Public Debt Management Act, which was under consideration by the National Legislative Assembly, would contribute to the bond market's development since it allowed the ministry to issue bonds without setting a budget deficit.

source: Bangkok Post 17.07.2007