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Thailand: Cabinet backs tax and fee incentives for community banks
The government’s “community bank” is receiving support after the cabinet approved tax and fee incentives to help businesses.
Deputy government spokeswoman Traisuree Taisaranakul said on April 27, the cabinet signed off on tax and fee incentives to support the community bank, as well as endorsed a reduction of the property transfer and mortgage fees for the bank’s establishment and operation.
The tax measures include waivers of personal income tax for members on interest earned from deposits in all accounts worth less than 20,000 baht, as well as income earned from dividends and refunds available from annual net profit allocation and stamp duty on documents the institution issues to members.
The cabinet also approved cutting property transfer and mortgage fees for the bank’s establishment to 0.01% from 2% and 1%, respectively.
Ms Traisuree said the tax incentives offered to the people’s financial institution align with Thailand’s 20-year national strategy plan to reduce income disparity and upgrade existing savings groups.
She said many existing savings groups and Village Funds remain reluctant to upgrade their organisations to become people’s financial institutions for fear of the tax burden.
According to Ms Traisuree, the people’s financial institution scheme aims to assist people in remote areas access capital and reduce loan sharks.
The government reportedly plans to forgo about 20.6 million baht from such tax incentives.
There are three community banks established under the People’s Financial Institution Act of 2019. They are Tambon Ban Pao People’s Financial Institution in Phutthaisong district in Buri Ram province, which was established on Aug 25, 2020; Tambon Nam Khao People’s Financial Institution in Chana district in Songkhla, established on Nov 12, 2020; and Ban Than Por People’s Financial Institution in Tambon Mai Riang, Chawang district in Nakhon Si Thammarat, established on Dec 16, 2020.
The Finance Ministry reported around 20,000 Village Funds have the potential to be upgraded to community banks.
There are 79,604 Village and Urban Funds with a total of 250 billion baht in revolving funds and 13 million members nationwide.
The Village Fund marks 20 years of operation this July.
The government has ambitions to upgrade the funds to people’s financial institutions, through which they can support their own community businesses.
The Village Funds are classified as Grades A, B, C or “underperformers”.
Grade A or B Village Funds are considered premium grade in terms of management competency, attractive returns on investments, decent accounting standards and complete information presented in an annual report, and providing a good standard of care for their members.
A combined total of 50,000 Village Funds are deemed Grade A or B, while Grade C funds stand at 20,000.
Some 7,000-8,000 funds have been classified as underperformers.
Grade A and B Village Funds have the potential to upgrade community businesses and community financial institutions, while Grade C funds and underperformers have been ignored over the past several years when it comes to offers of government support because of their poor management and relatively bad debt.
The government has allocated a combined total of 180 billion baht over the past 20 years to support Village Funds.
Source: https://www.bangkokpost.com/business/2115631/cabinet-backs-tax-and-fee-incentives-for-community-banks