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FSC boss calls for transaction tax change

Choi even agrees with ruling party’s idea of scrapping the levy
Mar 08,2019
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Financial Services Commission Chairman Choi Jong-ku speaks to reporters at the Government Complex in central Seoul on Thursday. [YONHAP]
Financial Services Commission (FSC) Chairman Choi Jong-ku agreed with the ruling Democratic Party (DP) on the need to do something about a tax levied on stock trades.

“[I] agree with the opinion of the [DP] on the need to further ease the burden on transaction taxes […] and levy taxes instead on the profits made from investments,” Choi said Thursday. “While the party is more aggressive and the tax authority wants to approach the issue gradually, we believe that if there’s a discussion - on whether to ease the tax or abolish it - it is welcome.”

Choi said the issue will be resolved in the process of reforming the tax code at the National Assembly.

On Tuesday, a DP committee on the capital markets proposed gradual steps to abolish taxes on equity and mutual fund trades that are levied regardless of whether the investor makes a profit or a loss.

Some believe the tax has inhibited investment.

The DP said the current tax is based on a regulation from the ’70s when there was less information on financial investments. Today, technological advances allow a government to tell if an investor has profited or lost money, which wasn’t possible in the ’70s.

Finance Minister Hong Nam-ki responded negatively to the idea and flatly denied that the government is looking into abolishing transaction taxes. Yet he did say the government is open to the idea of gradually lowering the tax rates on transactions.

The FSC chairman’s comment was made as the financial authority announced its policy goal for this year, which included the possibility of placing a maximum limit on loans used to pay house borrowed from those whose business is renting out apartments and reducing the growth of household debt in Korea.

The FSC said it will come up with specific details on private business loans in the second quarter, adding that rent-related loans take up roughly 40 percent of small business loans.

Choi said the government is being cautious about the issue as some small business loans are used not only for the individuals’ businesses but also for personal reasons, such as buying groceries or paying their bills since some are restricted from taking out household loans from banks.

The FSC said its main policy goal for this year is to encourage innovative finances, improve the credibility of the local finance industry and stabilize the financial market.

“We will select innovative projects so that people can actually benefit from changes, like encouraging mobile payment services and countering illegal lending,” Choi said.

“We will strengthen the role of finance in contributing to economic growth, while speeding up innovation in the financial sector, establishing a financial system centered on services for consumers and establishing a fair and transparent financial order,” he said.

During a press briefing, the FSC chairman said the acquisition of Daewoo Shipbuilding and Marine Engineering (DSME) by Hyundai Heavy Industries (HHI) will eventually be positive not only for the local shipbuilding industry but also for the economy of the region.

“We are well aware of the concerns that the labor union and regional community have over the acquisition of DSME,” said Choi. “The two biggest concerns are job security and whether HHI would take away all of DSME’s orders and let DSME go bankrupt.”

Choi said that wouldn’t be possible, stressing that the goal of DSME’s main creditor, Korea Development Bank (KDB), is to find a new buyer for the company and therefore revitalize the shipbuilding industry.

“When you look at the current shipbuilding industry situation, HHI’s going through an additional corporate restructuring of DSME is unlikely,” Choi said. “In particular, the management of DSME will be allowed to be independent.”

He said the possibility of HHI allowing DSME to crumble after acquiring the shipbuilder for a hefty amount is low.

The KDB plans to sign a contract with HHI over the acquisition of DSME later today.

“In the longer-term, [the acquisition of DSME] will benefit DSME workers and the regional economy,” Choi added.

When asked whether the FSC is concerned with job losses of people in their 50s, which is becoming a major issue, the FSC chairman responded that his focus will be executing measures that were released last year.

“The measures that we came out in supporting the automotive and shipbuilding industries [last year] are not enough,” Choi said. “[But currently] we will faithfully carry out the measures.”


BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]