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Thailand to study levies on capital inflows

BANGKOK, Nov 17 (Reuters) - Thailand will study the use of levies such as a Tobin-style tax on international transactions to control inflows of global capital, but there was no plan to impose them soon, a finance ministry official said on Wednesday.

“For a Tobin tax, I don’t think we can make it this time because that will require a law, which needs to go to parliament for three readings,” Satit Rungkasiri, chief of the ministry’s Revenue Department, told reporters.

“But it’s an interesting tool for future use,” he said.

Nobel prize-winning U.S. economist James Tobin first proposed a small levy on currency trading in 1972 to penalise short-term speculation after the United States abandoned the gold standard and floated the dollar.

Easy-money policies in the developed world are swamping emerging-market economies from Thailand to Brazil in global capital as money flows to higher-yielding markets, driving up currencies and complicating economic policy.

The Thai baht THB=TH is up more than 11 percent at a 13-year high this year against the dollar, while Thailand's stock market .SETI has surged more than 40 percent as foreign investors pile into Southeast Asia's emerging markets.

In October, Thailand imposed a 15 percent withholding tax on interest and capital gains earned on Thai debt by foreign investors to stem inflows, but many economists expect tougher measures if the baht keeps rising and eats into export revenues.

Local media have reported the government is considering either a one-time 2 percent inflow tax or a Tobin tax collected on every transaction -- a measure South Korean Finance Minister Yoon Jeung-hyun said on Oct. 19 his country was studying.

Satit said the Thai Finance Ministry would examine inflow taxes as part of a broader tax restructuring plan, which he said may require input from the private and academic sectors.

Bank of Thailand Deputy Governor Atchana Waiquamdee told Reuters on Tuesday the central bank was considering stronger capital controls but was wary of their long-term damage and wanted to see what steps other Asian countries introduced [ID:nSGE6AG00S].

“A lot of countries are thinking about these kinds of measures. It doesn’t mean we are not thinking about it. But some measures you have to weigh very carefully about the benefit and cost,” she said.

“Empirical evidence shows us you may be able to discourage short term inflows,” she added. “We study the benefit and cost of each measure in the short run and long run and then put it under the table,” she said

Satit said measures to curb fund inflows ultimately are the responsibility of the Bank of Thailand. ($1=29.98 baht) (Writing by Orathai Sriring; Editing by Jason Szep)

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