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Tuesday, October 14, 2003

Thailand plans tax on fast capital flow to curb baht speculation

Associated Press
Bangkok, October 14

Prime Minister Thaksin Shinawatra said on Tuesday that his government is
planning a tax on fast-capital flow in a bid to curb speculation of the
local currency baht in the foreign exchange market.

Thaksin's comment immediately led to a drop in the value of baht, which has
strengthened to a three-year high against the dollar. At 0205 GMT, the
dollar was quoted at 39.59 baht, up from 39.52 baht early on Tuesday.
Some businesspeople have worried that the unusually strong baht will make
exports more expensive.

Thaksin told reporters that the Finance Ministry and the central bank are
working on details of the tax plan, particularly the definition of fast
capital flow.

"We haven't reached a conclusion yet about the definition of fast capital
flow whether it should be three-month, one-month or seven days," he said.
He said one possibility is taxing capital that stays in Thailand less than
three months.

"If it stays longer than that, it won't be subject to tax," he said.
Short-term capital flow is not "healthy" for the economy and the government
should have measures in place that can protect the country to "a certain
extent," Thaksin said.

He said the measures, which will not have a retroactive effect, should come
out soon if all parties agreed on the details. Thaksin said the government
needs to study the impact of the measures before issuing them.

"We have to study both good and bad effects. Every measure may create
short-term disruption, but they should be good for the economy in
long-term," he said.

Finance Minister Suchart Jaovisidha will talk to Bank of Thailand
Pridiyathorn Devakula in a few days about the measures which will be
finalized soon, he said.

On Monday, Bank of Thailand Governor Pridiyathorn Devakula had said that he
favored a slightly weaker Thai baht, noting the unit's recent rise could
have "some effect" on the country's exports.

© Hindustan Times Ltd. 2003.
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