Korean regulator opposes derivatives tax proposal

  • South Korea
  • 08/29/2008
  • Bloomberg

South Korea’s financial regulator opposes the introduction of a tax on derivatives transactions that was proposed by a state-backed researcher, an official said.

The Financial Services Commission will recommend to tax authorities they shouldn’t impose a trading tax on derivatives as it may damp market activity, said Yoo Jae Hoon, a spokesman for the Seoul-based agency, by phone today.

The Korea Institute of Public Finance, which is partly funded by the government, said in a report last month that a levy on derivatives trading should be introduced to help stem excessive speculation and increase tax income. South Korea is the world’s second-largest derivatives market by transactions, accounting for 18.2 percent of the number of contracts traded last year, according to the report.

The regulator will also recommend an extension of mutual funds’ exemption on stock-trading duties, Yoo said. The exemption is due to expire by the end of this year.

Yoo was clarifying comments made by Chairman Jun Kwang Woo in an e-mailed speech today.

“We will work with the finance ministry to ensure market- related tax reforms benefit the financial markets,” Jun said in the statement.

Jun had said in March he would ease regulations to bolster the competitiveness of South Korea’s financial industry. The three-month daily average of the value of transactions on the benchmark Kospi stock index declined 36 percent from the same period a year ago.