Nattaporn Jatusripitak, spokesman for the deputy prime minister in charge of economic affairs, said “a budget of US$40 million, for this year’s contribution, will be allocated from the central budget and those for the remaining four years will be from the annual budget”.

ACMECS is a grouping of five countries – Cambodia, Laos, Myanmar, Thailand and Vietnam. Although ACMECS was born in 2003, there is no financial mechanism to raise capital to finance development projects, which have been normally funded through borrowings and aid from partner countries.

“Last year, Thailand chaired ACMECS. We’ve presented the ACMECS master plan built on three pillars: seamless connectivity, synchronised ACMECS economies, and smart and sustainable ACMECS. Then, we’ve discussed about an ACMECS fund aiming to give financial and technical support to projects under the ACMECS master plan,” Nattaporn said.

Such support included contract and consulting services, feasibility studies of projects, studies of environmental and social impacts and project expenses, which will develop projects capable of raising funds from the private sector and international funding sources.

The initial amount of the ACMECS fund will start at $500 million. Thailand will contribute $200 million and the other four countries – Cambodia, Laos, Myanmar and Vietnam – will together contribute $100 million. The remaining $200 million will be contributed by partner countries for development (Australia, Japan, South Korea and the United States).

Nattaporn said that after this, two more funds – the ACMECS Infrastructure Financing Facility and the ACMECS Project-based Financing Facility – would be set up.

The TRC Amendment Act No 52 (Amendment Act), published in the Royal Gazette on May 22, introduced important amendments to the definition of “company or juristic partnership” as established under Section 39 of the TRC.

The definition of “company or juristic partnership” has been extended to include mutual funds established under Thai laws or under foreign laws. As a consequence of this particular amendment, a mutual fund will start being subject to income tax in Thailand.

According to the Amendment Act, mutual funds will be subject to income tax at 15 per cent on gross income (that is, before deduction of any expenses). Gross income shall include only income as established under Section 40(4)(a) of the TRC, such as interest income and discounts derived by the mutual funds.

The income tax can be collected via the withholding tax mechanism applicable on the payment of such income by the issuer of respective debt instruments, resulting in issuers of debt instruments (which previously had no withholding tax obligations on payments made to mutual funds) being required to deduct a 15 per cent withholding tax on such payments (similarly to their withholding tax obligations already applicable on payments to other investors).

However, it is worth noting that any tax withheld can be credited against the mutual fund’s income tax payable and that it should not apply to income arising from deposits, bills or debt instruments held before the entry in force of the Amendment Act (that is, before August 20, 2019).

In light of the above, our understanding is that this amendment intends to reduce existing tax discrepancies in the form of additional tax burdens currently imposed on direct investment in debt instruments when compared to the investment in debt instruments via mutual funds.

In addition to the above, we note that the Amendment Act has also extended the definition of income under Section 40(4)(g) of the TRC to include income from sell-back of investment units to mutual funds specifically valued in money exceeding the amount invested.

As a result, gains derived from the disposal of investment units by foreign corporate investors not carrying on business in Thailand should equally be subject to 15 per cent withholding tax under Section 70 of the TRC.

Importantly, the Thai Revenue Department has clarified that a provident fund shall be understood as a fund that is set up in accordance with a specific law and it is not a mutual fund. Therefore, a provident fund should not be subject to income tax as prescribed under the Amendment Act for mutual funds.

Finally, please note that secondary legislation is expected to be issued exempting income tax for the Retirement Mutual Funds (RMFs), but not for the Long-term Equity Funds (LTFs).

Contributed by BENJAMAS KULLAKATTIMAS, a tax partner with KPMG in Thailand

Ministry spokesman Sompop Pattanariyankool said the JDA’s A-18 block in the Gulf of Thailand will stop operating for 14 days from July 7-21 in order to improve and repair production and transmission equipment for natural gas.

As a result, about 440 million cubic feet will be lost from the system per day, which will affect power and NGV production and use in the South of Thailand.

Egat’s measures extend from fuel adjustment of the Chana power plant in Songkhla province to diesel to all power plants and small power producers in the South during the temporary shutdown of the JDA’s A-18 block.

Power could also be purchased through HVDC from Malaysia in an emergency case.

On the fuel side, 18.6 million litres of diesel will be reserved at Chana power plant and a minimum reserve of fuel oil will also be set aside at the Krabi power plant.

PTT will make provisions to continue supplying oil throughout the overhaul period.

The power transmission system will get ready to supply power to the South, while teams are being arranged to tackle any emergencies.

Sompop said that PTT is preparing the measures for NGV by supplying NGV in gas tanker trucks before the temporary shutdown and allocation of gas from the central area to the lower South to supply 12 NGV gas stations in four provinces – Surat Thani, Nakhon Si Thammasat, Songkhla and Pattani – where demand is about 90 tonnes per day.

In addition, the Energy Ministry has asked businesses, manufacturers and people in the South to help save energy from 6pm to 9.30pm every day when the JDA’s A-18 stops operating temporarily.

The next meeting of the country’s Monetary Policy Committee will be on June 26, 2019.

Many central banks are likely to cut their policy rates. Although the Thai economy is likely to slow down, economic stimulus through interest rate reduction will have limited impact due to the high level of household debt, which causes a risk to the country’s financial stability.

The economic outlook of various countries are seen as worsening this year and many central banks such as those of Australia, New Zealand and India, as well as neighbouring Asean countries such as Malaysia and the Philippines, have lowered interest rates at least once in the past six months.

In addition, various key central banks have begun to show that their monetary policies will be more relaxed going forward, according to TMB Analytics. It is expected that the central bank of major economies, such as that of the US, will cut their policy interest rate at least once this year.

Meanwhile, the Japanese and European central banks may also use more relaxed financial measures to manage their economies.

The US economy has displayed worrying signs, including the decrease in employment per month from the average of 223,000 people to 155,000 people this year, or the inflation rate, which has been below the 2 per cent target since October 2018. In April, inflation stood at 1.6 per cent.

The Thai economy, on the other hand, has also been slowing since the beginning of the year and the prospects of a recovery in growth remain unclear. This is because the trade war is still causing a high level of uncertainty in global trade, as well as the delay in the 2020 budget due to delays in the formation of a new government.

The budget delay will set back economic stimulus measures by the new government, such as government investment that may help push the growth of private investment towards the end of the year. The slowdown of the Thai economy since May 2018 may also be a key reason for the BOT to consider reducing its policy interest rate to stimulate the economy.

However, stimulating the economy by reducing the policy interest rate may have a limited impact as the total value of loans taken from commercial banks have risen to Bt4.6 trillion, growing by 10.1 per cent year on year in the first quarter of 2019.

The amount of non-performing loans (NPLs) – loans due for over 90 days – has also been increasing. NPLs currently amount to Bt1.3 billion, or 2.75 per cent of total loans. The highest NPLs are among housing loans, amounting to Bt7.7 billion, followed by automotive loans, at Bt1.9 billion.

The lowering of interest rates by the central bank may stimulate household debt to rise even further, jeopardising the financial stability of the Kingdom’s economy.

TMB Analytics predicts that even though the global policy rates will decrease and the Thai economy will likely slow down, the risks on the financial stability of the country will pressure the BOT not to cut rates this year. TMB Analytics expects the central bank to maintain their policy rate at 1.75 per cent throughout 2019.

In this financial environment, Globlex Securities (GBS) predicts that the Stock Exchange of Thailand (SET) will be in the range of 1,660 and 1,693 points. The securities brokerage firm suggests that investors put their money in stocks that are in the SET50 category. As for the price of gold, their suggestion for short-term speculation ranges between US$1,330 to 1,360.

The Thai stock market’s direction has responded positively to both domestic and external factors, said Wilasinee Boonmaungsong, director of the research department of Globlex Securities Co Ltd (GBS). She cited the Industrial Confidence Index report in May, which showed an increase in purchase orders, sales volume and production volume.

She expected to see the new government accelerate investment in large infrastructure projects to help facilitate foreign investment and stimulate the economy.

The negative factor that has been affecting the Thai stock market is the trade dispute between the US and China, she said, while the local negative factor continuing to impact Thai stocks are worries over political stability of the new government.

Yesterday, the SET index ended at 1,683.60 , up 16.37 points from Monday’s close, with a total trade value of Bt61.97billion, of which foreign investors accounted for Bt4.12 billion in net buy.

The Internal Trade Department’s director-general, Wichai Phochanakij, yesterday said it was ready to share details about the announcement with 353 private hospitals.

The hospitals will then send reports about their drug and medicine services to the department. This information will then be discussed with OIC to revise health insurance to ensure it is a reasonable price.

The reward structure created incentives toward high assessments and the massive additional penalties if the importer refused to pay deterred any appeal to the courts.

That changed when the new Customs Act came into force on November 13, 2017. The penalties at the court level for duty evasion cases were reduced from four times the duty-paid value of the goods to a maximum of four times the actual duty.

For a lot more importers, this opened up the possibility of going to court. The rewards paid to Customs officials and informants were capped at Bt5 million and Bt10 million respectively, so large assessments no longer bring incremental benefit. These changes were very welcome among the business community.

We are now seeing further changes in the approach taken by Thai Customs.

The Investigation and Suppression Bureau – ISB (currently known as the Enforcement Division) used to conduct a lot of investigations on importers by securing a court warrant and seizing large volumes of documents, often acting on information from an informant.

These were particularly intimidating to deal with because of a perception that the company was involved in serious criminal activities, whereas in reality most underpayments resulted from a misapplication of complex rules or honest mistakes. The ISB is now focused away from revenue collection and more towards the protection of the quality of life – enforcing licensing standards and acting against counterfeit goods.

Audits are still undertaken by the Post-Clearance Audit Bureau (currently known as the Post-Clearance Audit Division). However, the length of audits has dramatically declined as there are new limits to the period of assessment, and the importer has more options to challenge the assessment.

This means Customs are less concerned about agreeing to the number before issuing the assessment, as it is likely to be appealed. Customs is establishing several boards of appeal to handle the already increasing workload.

Customs at the ports are increasingly getting involved in technical matters. Companies are being more frequently challenged on issues such as tariff classification that don’t require a full audit. Instead of the case being transferred to headquarters, arrears are being collected at a port level. Customs officials still get a 10 per cent reward from notices of assessment. Unlike the audit cases, where the reward is capped per an audit case, the issuing of notices of assessment is done on a per shipment basis, so the cap of Bt5 million applies per shipment.

This change in approach by Thai Customs will require a change in approach by importers under audit. Previously, a common strategy was to let Customs make the running. They would audit (or investigate) and then disappear for several months.

A wildly inflated claim would lead to several more months of negotiations before a reluctant settlement in many cases.

The risk of fighting a case in criminal court was just too high, and so a lot of companies settled despite their belief that they had done nothing wrong, or that inadvertent errors should not be so heavily penalised.

Now the previously long period of negotiation appears to be much shorter. Cases will be written up and assessed regardless of any agreement, or lack thereof.

Importers under audit need to make technical arguments more quickly and more robustly than before, otherwise it is likely that a large assessment will be made and the Board of Appeals will have to decide, often months or years after the initial challenge.

The traditional “wait and see” strategy is almost certainly over. Importers under audit should proactively assess potential weak points and be prepared to rebut the Thai Customs view of matters before they are crystallised into a formal assessment.

The previously available breathing space is probably no more, and inaction will lead to an assessment.

Proactively managing the technical issues and reviewing compliance against the sometimes complex import rules could realistically make the difference between a court case, with the associated sleepless nights, or the sleep of the just.

Contributed by PAUL SUMNER,

partner of customs & international trade, PwC Thailand.