Yuanta Securities (Thailand) noted that, previously, the Fiscal Policy Office (FPO) had disclosed information regarding the tax restructuring, which involve setting the same 15% rate for personal and corporate income tax while eliminating double tax deductions, increasing Value Added Tax (VAT) from 7% to 10%, and intensifying the efficiency of wealth tax collection.
The analyst highlighted that a reduction of the current 20% corporate tax rate to 15% could bolster earnings per share (EPS) in the Thai capital market by approximately 5-7%.
The government’s last adjustment to the corporate tax in 2016, when it was lowered from 30% to 20%, resulted in a 20% surge in the SET index, outperforming the 9% growth of the MSCI EM index and 5% rise of the MSCI Asia ex Japan index.
If endorsed, the corporate tax reduction could possibly propel the SET index to outshine other regional markets once again in the forthcoming year.
Meanwhile, the analyst also signalled that the adjustment to the VAT could mildly impact consumption and inflation. However, these effects might be neutralised by the accompanying cut in personal income tax while staple products are likely to remain unaffected.
Furthermore, thanks to tax incentives and low level of interest rates, Thailand’s infrastructure investment could experience a potential rebound.
As a consequence of the potential tax restructuring, Yuanta Securities (Thailand) anticipates a positive trend for both the SET Index and ‘Domestic Play’ stocks, including prominent players such as KBANK, BBL, SCB, CPALL, CPAXT, BJC, SAWAD, TIDLOR, JMT, and OSP. The analyst recommends investors to keep a close eye on developments in this area, as the Ministry of Finance is expected to finalize the decision by the end of this year.
