Finance Minister Rules out Abolition of the Tax
Deputy Prime Minister for the Economy and Finance Minister Hong Nam-ki said the government is considering lowering the securities transaction tax, stressing that abolishing it is out of the question.
Hong made the remarks during an interview with Yonhap News at the Government Complex Seoul on Feb. 22.
He said, “We will implement a phased cut in the stock transaction tax to help reinvigorate South Korea’s capital market. We will implement the cut in consideration of its effects on the financial market and fiscal conditions.”
He added, “But we have not decided yet on how much we would lower the tax and when. The rumor about its abolition is not true.”
Stock transaction taxes are withheld from all stock transactions regardless of whether they lead to a profit or a loss. The securities transaction tax was first introduced in 1963 but was abolished once in 1971. It was revived in 1978 and have been in effect since then. Under the current law, tax authorities impose 0.3 percent per transaction, including a special tax for rural development.
In 2018, the stock transaction tax amounted to 6.2 trillion won (US$5.51 billion), up 1.7 trillion won (US$1.51 billion), or 38.4 percent, from a year earlier. The figure reached a record high despite the fact that the stock market was in the doldrums. Accordingly, critics called for abolition or reduction of stock transaction taxes.
Hong stressed that he would not increase the capital gains tax on stock trading but incrementally expand the application of the tax by 20201 as planned.
Currently capital gains are taxed on a small number of top-tier investors with more than 1.50 billion won (US$1.33 million) worth of stock holdings. The government decided to scale down the holdings threshold subject to the capital gains tax to 1 billion won (US$888,889) in April 2020 and 300 million won (US$266,667) in April 2021.