Securities trading tax to be cut
The tax on securities trading will be cut to 0.1 percent from the current 0.5 percent, if a revised bill is approved by the National Assembly. This would be the first time since 1978 for a reduction in the tax on such trades. “The amendment is needed to meet the tax principle of having a tax where income exists,” said Kim Chul-min of the Democratic Party of Korea, who proposed the tax revision bill to the Assembly late last week.
The tax on securities trades was introduced to replace the transfer income tax in the past when it was difficult to grasp actual income without the real-name financial system, Kim said. The current tax policy, however, can force investors to pay a double tax, paying for both trades and transfers.
Financial analysts have also raised the problem in recent years, saying that the current tax policy is not corresponding to the national trend of low interest rates.
The Bank of Korea (BOK) has maintained its benchmark key rate at 1.5 percent after it increased the rate by 25 basis points in November last year, the first rate hike since June 2011.
“Regardless of last year’s rate hike, the current securities trading tax is still high because of the double taxation issue,” said Kim Jwa-mook, an industry official.
“The transaction fees and taxes were not lowered while interest rates remained low,” Kim said. “There seems to be a consensus in the market that the tax rate should be cut to encourage foreign and domestic investors to invest more actively.”
Currently, investors are paying a 0.3 percent tax for each trade they make on the domestic stock market, while they pay a 0.5 percent tax on trades outside the market.
Other countries such as China, Singapore, Taiwan, and Hong Kong lowered their tax rates to 0.1 percent from 0.2 percent.