Capital Inflow Tax

[Naam]

As I said, I transfered more than the 20k requirement and stated 'property purchase' on the transfer, the funds were released in full to me.

So as far as any property relation is concerned, everyone should stop worrying about it. If you still are and I can understand that, TIT, go to your bank here before you transfer it and ask about it, go to head office not a local branch and still if worried, transfer less than the 20k, but as far as Bkk Bank is concerned, did not happen.

------

lucky you! may i presume that you are not banking with HSBC?

[bendix]

Gaudente, are you kokothemonkey in disguise, by any chance?

[samtam]

Honourable Samtam, Esq., Sir,

-i solemnly declare to try hard not to use obscene expressions and swear words such as "rubbish" in future. however, the emphasis is on "try hard".

-i did not call any information from HSBC rubbish. your posting did not mention where your information came from.

-your quote "i am calling my bank" means (based on my limited knowledge of the english language) that your are going to call your bank, i.e. future and not past tense like "i have called my bank".

however, as you feel insulted please feel free to challenge me for a duel (preferably heavy sabres) or alternatively share a good bottle of thirty year old portwine in my home once we know for sure that the BOT measures are of no concern for us non-speculators.

p.s. i called my bankers in Singapore and they confirmed the information i received from Siam Commercial Bank .

Dr Naam

No grudges held. A good argument with many contributors trying to assess the limited information from the appropriate sources, with the happy resolution that the new rules now, (as of yesterday afternoon's clarification to banks, I understand) do not include property investment, which is a relief to me, given the potential need previously considered to raise an additional THB9m for a condo purchase. Our flurry of words and posts perhaps a reflection of how frustrated we were by the situation. Water under the bridge I hope, although it will be interesting to see whether there is any negative impact on the condo market prices. Chok dee.

[cutter007]

You would think that property buyers would be ecstatic over the effect that the BOT actions and reactions have had. A weakening of the baht translates well when one is bringing in money for large purchases such as condos and houses. As usual, I'm astounded at the negativity of many farangs when something is done that improves their position so dramatically.

That is a very good point, however, the way the government did it was not good. If the country had sound

economic principles to begin with, there would be no reason to use such a rash measure to prop up the baht.

The last thing the Thai government is trying to do is prop up the baht; they are trying to prop up foreign currencies. How successful they will be remains to be seen. They are acting in a way that benefits most of us readers on this forum. Apologies to currency speculators in advance!

What does this mean "they are trying to prop up foreign currencies" do you even know anything about economics? This doesn't make any sense.

Do you actually mean to tell me that they weren't trying to stop the rapid strengthing of the baht, but were actually trying to devalue the EUR, Yuan and USD????

[cutter007]

I forgot to add that the property agent didnt put up much of an argument when I said that I was holding off transfering the money until the rules wre made clear. They initially said that they hadnt heard of it, but eventually admitted they had. So if they accept that property might be subject to the 30% witholding tax then I will hold off until I read otherwise.

I'm with you obsession, I will write off my 25% deposit that I have allready paid and walk away. On principle I would not give the Thai gov. an extra 30% so they can earn free interest for a year.

The way this government is behaving there is a very good chance they can imply further penalties for farangs owning asets in Thailand.

One thing is for sure, the juta have a lot of assets in $US, this way their ill gotten fortunes increase in value when they repatriate them back to Thailand. It's the only logical reason for this insane move.

Its not the junta, it is the BOT itself that has been buying up huge USD reserves for some time now.

It is also not a secret that they are lossing millions of dollars a day by doing this with the baht gaining in value.

These are not secrets, and it been well documented on Thai news channels, Thai newspapers, and even mention of it in the English newspapers.

But if the idea of a low down corrupt junta makes you feel better..............then go right ahead with your theory.

[obsession]

Asia Property Report - December 20 - news

This means foreign purchasers of condominiums can bring funds into Thailand to purchase condominium property. According to a major local bank, foreign condominium purchasers should clearly state the project name and unit number when remitting funds.

Thanks Geppis72.

I had to fill out the uk banks swift form online and print it out. Its the only way they transfer funds. Theres no space for extra information like a condo address. I guess I am still not going ahead yet, but thanks for the info.

If you decide to go ahead:

1. print a copy and send it registered (with receipt of delivery) to the bank with additional info for which condo the money is.

2. send the same per email telling them the money is on its way.

3. You might ask your bank to write a letter what the money is for. (if you wish them to know, that is )

LaoPo

Thanks. I will do that when I go ahead with a purchase. I have pulled the plug on the one I was buying untill I see if prices change with this fiasco and the visa rule effect kicking in.

It says in the Bkk post today ,that property is exempt. A leading real estate company says many people will be holding off to see what happens to the baht.

[Bruce1]

I see Dr Tarissa and the finance minister are still defending this saga in the Post today. They're obviously under big pressure to justify themselves.

I read the following quote from above to mean everything except this exception remained affected by the 30% rule; now some are saying property is exempt, but honestly, does the left hand know what the right is doing?

"1. Foreign currencies bought or exchanged against baht for equity investments in the SET in MAI and in TFEX(futures) and AFET(agrifutures) are exempt from the 30% reserve requirement. Financial institutions shall ensure that such foreign exchange transactions are for the aforementioned purposes."

I imagine many people will just decide Thailand is too messy to bother with and go elsewhere. I see half the money from the sharemarket selloff this week has alfeady left the country, according to today's Post, so how can that be good for the economy?

Most countries welcome foreign investment.

BTW what is "speculative" investment and who decides? Surely all investment is speculative, otherwise why bother?

[Gaudente]

Gaudente, are you kokothemonkey in disguise, by any chance?

kokothewhat ? never used other nicks apart Gaudente.

[Gaudente]

But if the idea of a low down corrupt junta makes you feel better..............then go right ahead with your theory.

I wish they were currupt:that would be at least a sign of intelligence. Instead they are plain flat dumb, and that's

even more scary !

[Martin]

"I imagine many people will just decide Thailand is too messy to bother with and go elsewhere"

I do hope that the above wishful thinking comes true.

It's terribly selfish of me to say: "Pull up the gangplank now that I am on deck", and I feel duly guilty!!

But let's look at it cooly from the Thai peoples' points of view.

What have they to gain by letting in waves of foreign capital that may recede at the worst moment?

The idea that foreign capital coming into a country is a good thing only holds true if that money builds factories for firms that have an assured order book, and so makes good jobs for local citizens.

That situation is something of the past now. Thailnd's export markets and its home market are going to be under severe pressure as consumers in so much of the world have less spending power left over when they have paid their heating and electricity bills. So there is no 'demand' for capital to build more factories, and the 'supply' of capital would go into property and create another bubble and we know what that leds to.

The BOT is, IMO, very wise to say:"You can send in money and buy property (or parts of the equity of Thailand companies), but what you can't do is send in money to lend to Thais who will be pauperised when you call it back (as happened in 1997)."

[Naam]

"If the country had sound economic principles to begin with, there would be no reason to use such a rash measure to prop up the baht."

*****

quite an interesting theory that the measures were meant to "prop up" the Baht. all these days my impression was that the BOT tried to stop a further appreciation of the Baht. but of course... now i stand corrected.

[rychrde]

Hi

haven't seen this link posted on here yet.... so here it is

BOT 22 Dec Summary

a huge collective sigh of relief. Though I personally will be more relieved if someone buys my condo!!

I'm not going to comment further on the shambles. Maybe these are hyper-intelligent beings who have manipulated the situation to sell off their worthless dollars...or maybe not.

Rych

[Asia4ever]

My apologies if this has already been mentioned on any of the numerous threads on this subject, but it is curious that BOT apparently did not to exempt from the 30% withholding, transfers in of foreign currency for the 800,000 Bt. retirement requirement .

Did somebody miss something (including me); was done by accident or by design?

And if you transfer in the funds in two smaller increments, you may have this dilemma as posted in another ThaiVisa thread:

About using several remittances below USD 20,000: these do not qualify for the Foreign Exchange Transaction Form, which will be useful if ever one wants to remit the money out of Thailand again in the future.

[VBF]

Hi

haven't seen this link posted on here yet.... so here it is

<a href="http://www.bot.or.th/bothomepage/General/PressReleasesAndSpeeches/PressReleases/news2549/Eng/n5249e.htm" target="_blank">

BOT 22 Dec Summary</a>

a huge collective sigh of relief. Though I personally will be more relieved if someone buys my condo!!

Rych

So, from that link, listed among the exempt transfers are:

"1.1. Foreign exchange transactions related to current account activities including transactions related to exchange of goods, services, income, transfers and aid. "

Does the required 800,000 Baht for a Retirement Extension fall into this category? Anyone??

[Krub]

My experience of yesterday 27 december

Transferred equivalent of 2.000 USD (in Yen) from my Tokoy bank to my account at SCB

It went through as usual no 30% cut

[cclub75]

[Lot of problem to access Nation's website from Europe, after the earthquake. I copy the whole article]

CAPITAL CONTROLS

Japanese delay plans

Reserve requirement 'a serious problem'

Amid the confusion over the Bank of Thailand's 30-per-cent reserve requirement, a number of Japanese-based companies have suspended plans to increase their equity in their Thai subsidiaries as they cannot afford the 30-per-cent withholding requirement, said Yoichi Kato, president of Japan External Trade Organisation (Jetro).

Kato also noted that the rapid appreciation of the Thai baht would affect future Japanese investment, especially if the baht rises to Bt33 per US dollar next year. Japanese investors viewed the central bank's decision to impose a 30-per-cent withholding requirement on capital inflows to halt baht speculation as "a much more serious problem than the coup', he said.

Kato said although the central bank intended to take action against speculative inflows, the measure affects several non-listed companies.

Though investors welcomed the central bank's decision to relax the measures, the draconian measures certainly affect financial transactions between headquarters and local subsidiaries in Thailand. He said Japanese investors still have three points of concern as the actual implementation remains unclear.

First, Japanese investors feared that intra-industry loans might be required to reserve the 30 per cent to be withheld. "No corporation can afford to reserve such a high proportion of capital," said Kato.

Second, he said Japanese financial companies are worried that borrowings from foreign financial institutions may be subject to the requirement, whereas borrowings from local sources wouldn't. "The treatment of loans from local and overseas sources is different," he said.

Third, the central bank has stipulated that if the transfer of shareholding equity exceeded 10 per cent, such capital inflow wouldn't be subject to the reserve requirement because it would be regarded as foreign direct investment.

However, Kato said that normally, the Japanese headquarters would gradually increase the capital in increments of less than 10 per cent of shareholding equity.

As a result, a number of Japanese headquarters and subsidiaries have put their plans on hold, pending clearer explanations from the BOT. Besides, there is the process of substantiating the actual outflows and inflows. "We have asked various Bank of Thailand officials and each of them gave us a different answer," he said.

He said the confusion over the withholding requirement might accelerate the withdrawal of Japanese foreign direct investment in Thailand next year, already marred by labour shortages, the rise of the baht, and questions over the stability of the political situation. The coup, on the other hand, didn't much affect Japanese investors' decisions.

Applications for direct investment through the Board of Investment from January to November this year totalled Bt280.25 billion, a drop of 41.79 per cent, compared to the same period last year. Japanese applications dropped by 38.78 per cent to Bt102.07 billion.

The Jetro head attributed the rise of the baht in the medium to long term to the strength of the Thai economy. However, he admitted the rapid rise of the baht from the end of November to December could largely be blamed on speculation. Kato said the withholding requirement might be necessary but the 30-per-cent requirement could be too high. The Bank of Thailand should have imposed only 10 per cent to curb speculation.

He said that as the baht was Bt40 per dollar at the beginning of the year, foreign investors based their investment on the assumption that the baht would have been at Bt38 to Bt40. Now however, they hope that next year the baht would stay at Bt36 to Bt37 to make their investment in Thailand feasible.

Jeerawat Na Thalang

The Nation

[VBF]

My experience of yesterday 27 december

Transferred equivalent of 2.000 USD (in Yen) from my Tokoy bank to my account at SCB

It went through as usual no 30% cut

Surely the minimum amount affected would be 20,000 USD?

[Martin]

At the time when the BOT announced the first witholding measure, I was aware that a speculative pressure on the baht was beginning. (I had received "Invest in the Thai baht messages from 'tipsters'.)

So I had a gut feeling that the BOT was acting not so much because the baht was a touch too high as in order to prevent it going far higher and maybe then crashing.

This morning I have seen the following:

John Succo, a hedge fund manager, addressed a letter to the New York

Times, explaining:

"The Federal Reserve creates credit through its open market operations

like REPOS and coupon passes. If the Fed wants to inject liquidity

(credit) into the system, they simply call up large broker dealers and buy

some of their bonds with credit they create out of thin air (this expands

their balance sheet). The dealer then passes this credit on to "the

market" by making loans to mortgage companies or margin accounts or

whatever. Because each layer of lender is only required to keep marginal

capital on hand, a $1 billion REPO done by the Fed eventually creates as

much as $100 billion in new credit to the consumer.

"That credit creates the liquidity for additional consumption in the U.S.,

but these days we are buying our stuff from China (other countries too but

we will just say China to make it easy). When a Chinese company receives

dollars in trade, this normally would drive up U.S. interest rates: the

company goes to the central bank of China to exchange Yuan for dollars;

the central bank of China would normally sell those dollars into the

currency market for Yuan thus driving up U.S. interest rates. But in our

world of today these dollars are being sterilized: the central bank of

China prints the Yuan to give to the company and takes the dollars and

buys U.S. securities.

"It is not the excess savings of Chinese investors that are buying U.S.

securities. It is central banks creating credit themselves to buy those

securities. The tick data that measure foreign inflows of money does not

distinguish between private investors and central banks going through

brokers to buy U.S. securities. We believe that as much as 90% of foreign

money buying U.S. securities (not just Treasury bonds, but corporate

bonds, mortgages, and yes, stocks) is not private investment, but central

banks.

……"In order for other central banks like China's to print the Yuan

necessary, they too must create credit. Public debt in Asian countries is

expanding as a result and creating worries: this is why Thailand came out

essentially raising margin requirements to reduce speculation that is

occurring as a result. Notice how they were quickly slapped down by their

trading partners who do not want to rock the boat at this time.

"This situation is very unstable in the long run. The Federal Reserves'

balance sheet this year alone has expanded by $30 billion in this way and

created $3.5 trillion of new credit in the U.S. Public debt around the

world is growing exponentially and total debt in the U.S. now stands at

nearly 3.6 times GDP (1929 was 2.8 times).

"My hedge fund's position is the opposite of the carry trade you mention.

There is coming (timing is unclear where it may be tomorrow or may be

years away) a massive correction in debt and derivatives whose magnitude

is only growing with time."

This goes towards confirming me in my feeling that the BOT did an excellent job. In effect they felt that the game the big boys are playing is getting too rough and some will get badly hurt, so that is the time for a little boy to taken well clear, and to show that he is a nice little boy if left alone, but there will be bluddy nasty happenings, if he is messed about with.

Wise old folk at the BOT !!!!

[Meerkat]

This goes towards confirming me in my feeling that the BOT did an excellent job. In effect they felt that the game the big boys are playing is getting too rough and some will get badly hurt, so that is the time for a little boy to taken well clear, and to show that he is a nice little boy if left alone, but there will be bluddy nasty happenings, if he is messed about with.

Wise old folk at the BOT !!!!

This chap seems to be a bit muddled. He's saying that Asian governments are printing their own currencies to buy USD assets, and that they are funding such purchases with an increase in public debt. This simply isn't the case in Thailand. Public debt as a proportion of GDP here is down from over 53% in 2002 to under 44% now. External debt service is down from over 17% to under 5% in the same time period, as is the size of the debt itself.

One thing I do agree with though is that public debt in the US is getting so large that it will cause a major upheaval in financial markets. The inverse carry trade he talks about (ie borrowing USD and switching it to another currency in the hope that the USD will be cheaper when it's time to repay the loan – the opposite of what people have been doing with the JPY for years) predicts a higher THB (inter alia) against the USD. The BOT on its own has no hope in hel_l of supporting the USD. Attempts to do so like those we have recently seen are both futile and show a deep ignorance of macroeconomics on the BOT's behalf (on top of their self-confessed ignorance about the very same market participants that they are charged with regulating).

[Martin]

I don't think that the BOT was trying to "support the US dollar". A mouse can't prop up an elephant.

My reading of their action was that the BOT was taking the baht 'off the field of play', as the game being played by the US and China is getting out of hand, as the previous poster agrees. And the BOT have succeeded in that, and also it will act as a warning to speculators that they may get their knuckles rapped if they lay any other bets against Thailand's interests.

I don't see anybody saying that it is 'Asian governments' running their bank-note printing presses---just the American and Chinese ones.

As to the moan from the Japanese who would like to increase their share in the equity of their factories, I would not expect the BOT to give a cuss that they are being disconcerted. If the Japanese were going to be buying out other foreigners, it doesn't affect Thailand. And if they would be buying shares from Thais, what would the Thais be able to get with the yen that they receive? Just more consumer goods.

Of course, if the Japanese had something serious to offer, like oil, it would be a bit different. But they don't.

From some point in the near future, economic management will be Management of Decline, and that is when Thailand will benefit from being 'steered' by oldsters who have some experience of times other than the bull run of the past two decades.

[Meerkat]

I don't think that the BOT was trying to "support the US dollar". A mouse can't prop up an elephant.

Considering that the bulk of the THB's rise this year has actually been the USD's fall, that is exactly what they were trying to do. This is one reason precisely why it was such a hare-brained scheme in the first place.

My reading of their action was that the BOT was taking the baht 'off the field of play', as the game being played by the US and China is getting out of hand, as the previous poster agrees. And the BOT have succeeded in that, and also it will act as a warning to speculators that they may get their knuckles rapped if they lay any other bets against Thailand's interests.

If you want to be part of the world economy (as Thailand does), forms of capital controls like these are counter-productive; you cannot have your cake and eat it.

I don't see anybody saying that it is 'Asian governments' running their bank-note printing presses---just the American and Chinese ones.

The original article stated:

1. “these days we are buying our stuff from China (other countries too but we will just say China to make it easy)”

2.“Public debt in Asian countries is expanding as a result and creating worries: this is why Thailand came out essentially raising margin requirements to reduce speculation that is occurring as a result.”

So he was saying that it is a larger problem than just China and the US.

As to the moan from the Japanese who would like to increase their share in the equity of their factories, I would not expect the BOT to give a cuss that they are being disconcerted. If the Japanese were going to be buying out other foreigners, it doesn't affect Thailand. And if they would be buying shares from Thais, what would the Thais be able to get with the yen that they receive? Just more consumer goods.

Of course, if the Japanese had something serious to offer, like oil, it would be a bit different. But they don't.

If you buy something in another country, you use that country's currency as the method of payment. The Japanese want to increase equity with baht, not yen. Baht that is now harder to buy.

From some point in the near future, economic management will be Management of Decline, and that is when Thailand will benefit from being 'steered' by oldsters who have some experience of times other than the bull run of the past two decades.

Because they did such a great job the first time round? Or during the 97 crisis?

[Martin]

I surmise that this decision by the BoT had its genesis in the 'inquest' that would have taken place after the 1997 crisis.

We have to be careful about our conjectures as to the development of thinking about policy on this forum, as the moderators are exceedingly cautious that we don't overstep the mark. But if we look at a certain speech at the end of 1997, and the way that its theme was re-iterated in the next such speech a year later, there had clearly been some thinking, starting well before the crisis, about whether Thailand's best interests lay in wholesale adoption of a "dash for industrialisation", or whether it wouldn't be better to take a more partial line.

Macroeconomics starts, for each and every nation, with the consideration of how best to secure the means to feed and house comfortably its populace.

Thailand's strength, macroeconomically, lies in its agricultural production and its clement climate.

Some industrialisation was clearly very acceptable, as 'icing on the cake', provided it didn't spoil the cake beneath.

To change the metaphor, by the mid-nineties, the tail was beginning to wag the dog. Then the tail (the emergent middle-class, property developers, financial manipulators etc and others who wanted to be part of the world economy) wagged the dog into trouble in 1997.

It is possible that the statement "Thailand is Bangkok, and Bangkok is Thailand" may have set the warning bells ringing that resulted in those parts of speeches on those ceremonial occasions a few years later. (I would need to check, but I think the statement was by a Prime Minister, or high Cabinet member).

What it all boils down to, is deciding just how much "a part of the world economy" it is in Thailand's interests to be. Obviously some groups will gain more by a higher linking. But making the decision for 'the greatest good of the greatest number' would indicate differently.

Generativity will come into it, too. We are all conditioned by our experience, and the older generations who have experienced former times as well as modern times will have different risk-taking behaviours from the younger generations who have only experienced the modern conditions. Also, those in the oldest generation tend to look more to what they are setting up for future generations than those in the younger generations do. the greatest concern of greatgrandparents is the future well-being of their great-grandchildren.

If we look back a few generations and also try to ascertain the outline of the conditions for the next few generations, the industrial era looks like being a 'one-shot pulse', with a width between its 30% points of 100 years from 1930 to 2030. Those of us who see the "parts of the world economy" for the next 16 years, or more, will live in interesting times. But it will be better to see the world economy from a position of being less embroiled in it, than deeply embroiled in it; and Thailand is fortunate to have the opportunity. Many countries don't.