SEOUL – The Financial Services Commission (FSC) of South Korea announced on Wednesday its intention to cancel a proposed capital gains tax on investments and to reduce the tax on stock transactions to 0.15 percent by 2025. The FSC also plans to implement measures aimed at increasing the wealth of ordinary citizens and alleviating their financial burdens.
According to Yonhap News Agency, these initiatives form part of the commission's policy objectives for this year, which include providing more than 210 trillion won (approximately US$157 billion) in financial support. This move aligns with President Yoon Suk Yeol's earlier statement about abolishing the planned tax on financial investments, initially set to be implemented at the start of the next year.
The tax on stock transactions has been progressively decreasing, falling from 0.25 percent in 2020 to 0.23 percent in 2021, and then to 0.20 percent last year. "The government has been making various efforts to improve the lives of our people through finance, but there is a need to expand these efforts based on the progress so far," FSC Vice Chairman Kim So-young said during a press briefing on Tuesday.
The FSC's strategy includes creating a "level playing field" in the stock market. This includes an overhaul of the stock short selling system, with a temporary ban on short selling currently in effect until at least the end of June. The FSC is also working on a new system to prevent illegal naked short selling and plans to diversify and strengthen penalties for such activities, including banning offenders from the stock market for up to 10 years.
In addition to these measures, the government aims to reduce the burden of interest on citizens and limit the rise in household debt. This effort involves collaborating with local banks and non-bank lenders to refund a total of 2 trillion won collected in interest payments. Under the proposed plan, approximately 1.87 million people with bank loans could receive refunds of up to 3 million won each, while those with loans from non-bank lenders could receive up to 1.5 million won each.
Furthermore, the FSC is expanding its refinancing program to assist people in replacing their existing loans with ones that have lower interest rates. So far, nearly 112,000 people have benefited from this program, refinancing a combined 2.53 trillion-won debt in credit loans and saving 53.9 billion won in interest payments. Over 5,600 people have also refinanced their home-backed loans, totaling 1.03 trillion won, and reducing their interest rates by an average of 1.5 percentage points.
The FSC also reaffirmed its commitment to helping people rebuild their credit ratings to facilitate their return to normal economic activities. Earlier this week, the government erased the overdue loan repayment records of about 2.9 million people, improving their credit scores by an average of 39 points and enabling around 2.5 million of them to refinance their existing loans at lower interest rates.