Stock transaction tax is reducedStarting next month, investors will pay less in taxes when buying and selling shares.
During a cabinet meeting Tuesday, the government passed the reform bill that lowers taxes on stock transactions.
The taxes imposed on Kospi stocks is lowered from 0.15 percent to 0.1 percent, while for Kosdaq stocks, the rate is lowered from 0.3 percent to 0.25 percent. The taxes imposed on the Konex, a market for start-ups that opened in July 2013, will fall from 0.3 percent to 0.1 percent.
The taxes imposed on stock exchanged in the K-OTC (Korea Over-The-Counter) market will be lowered to 0.25 percent from 0.3 percent.
The 0.15 percent special tax imposed on the stock trades, which supports farming and fishing, will remain.
The government said it also plans to lower the stock exchange taxes on unlisted securities this year.
“We expect the investment environment to improve as the tax burden will be eased while investment sentiment goes up,” said Chang Young-gyu, director of the finance tax division at the Finance Ministry.
The government said in particular it expects investment in Konex will improve as the tax rates were lowered the most.
Stock transaction taxes have not been lowered in 23 years, while considerable pressure has been applied to lower the tax to breathe life into the markets. The ruling Democratic Party has even demanded the transaction tax be abolished.
Since late last year, there has been a debate on the tax burden, with some saying the taxes prevent the Korean equity market from advancing, especially when investors have to pay taxes even when they are losing money.
There are no taxes imposed on stock transactions in major global markets, including the United States, Japan and Germany. Markets in China, Taiwan and Hong Kong impose taxes on trades, but their taxes are lower than Korea’s. China and Hong Kong imposes a 0.1 percent tax on any stock purchase or sale, while Taiwan’s tax is 0.15 percent.
The Korean Kospi has been stuck around the 2,000 mark since the beginning of the year, when it closed at 2,010 on Jan. 3, the first trading day of this year. The market on Tuesday closed at 2,061.25.
The government estimated it will lose 1.4 trillion won ($1.1 billion) from the reduction in the tax. Annually, the government collects around 8.4 trillion won from the stock exchanges.
The government also announced that it is easing foreign exchange regulations from May 28. Under the revised regulations, mobile purchases can be made at overseas stores that have a strategic agreement with Korean fintech companies. Additionally, consumers will be able to make currency trades with online services if the total exchanged is worth less than $2,000.
MG Community Credit Cooperatives and the National Credit Union Federation of Korea will be allowed to issue debit card that can be used overseas. Until now, cards from these institutions have been restricted to domestic transactions.
BY LEE HO-JEONG [firstname.lastname@example.org]