The existing law exacts taxes on trades to be calculated on capital gains and the plan is to remove them, leaving only the taxes on interest income from repo securities. According to Deputy Finance Permanent Secretary Sommai Phasee, this move will make the repo market a better barometer of interest rates.
There are two tiers of the repo market in Thailand. In tier 1, the Bank of Thailand is the counterparty, while in tier 2, nine banks and securities houses, acting as primary dealers, participate as counterparties in the repo market.
In repo transactions where the central bank is counterparty, market players have criticized these as not reflective of the market because of the risk-free nature of the transaction. As part of a long term strategy, the Bank of Thailand plans to inhibit itself from the repo market, leaving the banks to set the interest rates on these transactions.
