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Corporate tax cut for listed firms "unlikely"

By Siriporn Chanjindamanee

The Nation

Listed companies may not win further cuts in corporate income tax, as some companies with poor performance have been found to be seeking listing only to enjoy lower taxes.

A source from the Finance Ministry, who did not want to be named, said there was only a slim chance that after the review, the Revenue Department would satisfy listed companies' request to maintain the tax incentive. The department is instead focusing on overhauling the entire tax structure, to facilitate the economy as a whole.

This week, it would also be on the agenda of the Securities and Exchange Commission meeting. However, the meeting is unlikely to make any decision as the issue is in the power of the Revenue Department, the source said.

"Extension of the tax incentive is a sensitive issue. A higher rate means higher government revenue, but a lower rate would help capital market development, as more small companies would be attracted to list," the source noted.

Companies listed on the Stock Exchange of Thailand (SET) now pay a 25-per-cent tax rate, compared with the 30 per cent levied on non-listed companies. The rate for those listed on the Market for Alternative Investment is 20 per cent. There has been a belief that, after criticism about Thailand's tax rate being the highest in Asean, the government may lower corporate tax to draw more investment and increase business competitiveness.

A source from the Capital Market Supervisory Board admitted that since the tax incentive was awarded, the number of listed companies has grown. However, it was found that some companies obtained the listing status without achieving readiness in terms of internal management. Some showed substandard accounting systems and unprofessional management.

"They are in stark contrast to those listed in the past 10 years. Those companies prepared themselves for the listing, as their goal was to raise funds for business expansion. A tax incentive was not their main goal," he said.

He asserted that capital market authorities were supporting the listing of small and medium-sized enterprises, as some show growth potential and should be able to raise funds to support their expansion. However, some pulled out after the filing when they learned of the stringent listing rules. Some filed the listing applications and spent a year to prepare themselves for the listing. Only a few were really ready to follow through with the process.

"The authorities are open for SMEs' fund-raising. But many filed the listing applications purely for the tax incentive, without considering their own readiness. Financial advisers are also inefficient in ensuring that their clients meet the internal control and accounting standards," he said.

He urged the SET to clarify all requirements to would-be listed companies. The exchange should not only want to boost the number of listings, and entice new companies only through possible share price increases.

Earlier, Chanitr Charnchainarong, SET group head of the issuer and listing department, expected the number of new listings to dwindle as the tax incentive ended in 2009. Even with the incentive, only 17 companies were listed.

So far this year, five companies have been listed on the main bourse, six companies are about to launch initial public offerings and four are awaiting approval for listing. The market capitalisation of all 10 companies is estimated at about Bt5 billion. Fourteen companies, including one foreign company, with combined market cap of Bt20 billion are expected to file their listing applications in the second half.

"We are hopeful that the government will extend the tax cut, as it is an incentive for listing," Chanitr said.

-- The Nation 2010-08-02