* Tax cut may support prices in short term
* Farmers reject tax cut, threaten more protests (Adds farmer, industry quotes, protest latest)
BANGKOK, Sept 5 (Reuters) - Thailand will temporarily scrap a tax on rubber exports to support fallen prices, a move aimed at appeasing angry rubber farmers who are demanding a price subsidy and have staged mass protests, disrupting road and rail services in the south.
Around 20,000 protesters gathered at three main rally sites in the south of the country on Wednesday, but by Thursday only about 300 remained, blocking a few roads and rail routes.
Deputy Prime Minister Kittirat Na Ranong said on Thursday the tax cut would start immediately and run until the end of 2013.
But farmers, who are demanding the government buy rubber directly from them at higher-than-market prices, rejected the tax cut measure and threatened to escalate their protests.
"We don't accept any measure except the government must buy rubber from us at good prices otherwise we will stay and will fight further," said Amnuay Yititham, a protest leader.
Rubber prices tumbled to multi-year lows in mid-2012, due to a slow down in demand in China, which accounts for 35 percent of global rubber consumption.
Rubber farmers, who mainly support the opposition Democrat Party, have accused Prime Minister Yingluck Shinawatra of neglecting them, while supporting rice farmers in her key constituencies through a 600 billion baht rice-buying programme.
Under the current export tax regime, the tax is 3 baht per kg at a price between 80 and 100 baht. If the price falls below that range, the tax is 2 baht, and 5 baht above that range.
"The measure could help support falling domestic prices for a short period of time. However, it was better than doing nothing," said Luckchai Kittipol, honorary president of the Thai Rubber Association.
Traders said the measure would have no impact on prices as global demand remained thin.
The benchmark export-grade rubber sheet (RSS3) was at $2.75 per kg on Thursday, barely change from $2.80 per kg in August 2012, when farmers first asked the government to intervene.
Thailand is the world's biggest rubber producer and exporter with around 90 percent of its output heading overseas. Weak demand especially from the tyre industry in China, the world's biggest rubber consumer, have prevented prices from rising.
(Reporting by Apornrath Phoonphongphiphat; Editing by Michael Urquhart)