New KFIA Chairman Pledges to Work for Tax Exemption on Earnings from Stock Investments
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New KFIA Chairman Pledges to Work for Tax Exemption on Earnings from Stock Investments
New chairman of Korean Financial Investment Association is known for his toughness and vast connections in government, business communities

27(Fri), Feb, 2015


Chairman Hwang Young-key of the Korea Financial Investment Association.(Photo:KFIA)




Chairman Hwang Young-key of the Korea Financial Investment Association (KFIA) said he will make finding a solution for various tax problems on investment funds his priority among the various problems that the association has to take care of.

He said he will first work on exempting transaction taxes on investments in stocks made by the Korea Post and the National Pension Service (NPS) and removing the entire taxes slapped on investments related to stock transactions under a medium-to long-term prospective.

At a lunch following his inauguration at KFIA¡¯s head office in Yeouido, Seoul, he told reporters that the taxes paid by securities firms on their stock transactions were larger than the fees they earned from the stock transactions last year. He will first take up the exemption on taxes on investments made by Korea Post and the National Pension Service.

The new KFIA chairman, a former chairman of the KB Financial Group, said taxes assessed on stock transactions by Korea Post and the NPS depressed the derivatives market at a time when all measures are needed to develop the market to be globally competitive, noting that the taxes assessed on government transactions of derivative products could revive the market. He said he will steadily ask for the tax exemption on stock transactions for the development of the capital market in Korea and the exemption of taxes on all stock transactions in the end.

With a tax slapped on Korea Post for its stock transactions (0.3 percent), stock transactions by government and local autonomous organizations fell drastically to 460.2 billion won in 2013 from 40.332 trillion won in 2012, and the figures have continued to fall to a meager 23 billion won in 2014. The tax authorities decided to charge taxes on stock transactions to increase tax collection, but the move did not work, and in fact, it went the other way and depressed the derivatives market, Hwang said.

Hwang also made clear that the taxes on long-term investment like stocks should be removed, and investments by fund operators, to help settle the long-term investment culture in Korea. At the same time, it would secure balance in taxes assessed on investments in stocks, especially with those in the insurance market.

Hwang also said he will work to reform the current tax charged on overseas direct investments in stocks so that it can be split from the taxes charged on overseas investment funds. 

¡°It is critical that the taxes exempted on long-term investments in stocks and funds, noting that the retirement fund market still remains strong, despite its short time of operation compared to those in advanced countries due to the tax exemption on the investments made for more than 10 years,¡± the new chairman said.

Hwang said the tax collection reductions due to the tax exemptions would be recovered when the capital market has grown bigger. He said that people would not be able to enjoy their post-retirement lives if the overall tax exemption does not happen. 

Hwang also called for the international use of the Korean won in order to globalize the Korean financial market. 

¡°It¡¯s about time to talk about the ways to use the won for settling international transactions with the capital transaction and the transactions of real products have long been internationalized for Korea,¡± he said. 

The new chairman is a graduate of the prestigious Seoul National University Commerce College. In addition, he comes from North Gyeongsang Province. Many graduates of SNU from that province hold important positions in government and business circles.

He is also a Samsung man, as he entered Samsung Trading soon after graduating from SNU in 1975, but he was soon picked to work for the business group¡¯s secretary¡¯s office for Chairman Lee Kun-hee because of his fluent English.

   
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