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S Korea Mulls Hot Money Taxes

by Mary Swire, Tax-News.com, Hong Kong

17 November 2010


Following the completion of its host role at the G-20 summit, South Korea’s government is said to now feel free to look at measures, including taxation, to control the substantial flow of short-term foreign capital into and out of the country’s financial markets.

Shin Hyun-song, an economic adviser to South Korea’s President Lee Myung-bak, has disclosed that the government is considering financial stabilizing policies to put a brake on those volatile hot money flows, and that it is hoping to avoid the imposition of direct capital controls.

The tax measures under discussion could involve the re-application of withholding tax on interest and capital gains payable to foreign investors on South Korean government bonds (as has been recently imposed in Thailand); or the introduction of a bank levy on the financial system’s non-deposit foreign currency liabilities.

It was said that, as the government is still weighing up the pros and cons of each option, the timing of any announcement is, as yet, unknown.

TAGS: tax | economics | banking | capital markets | withholding tax | Korea, South | currency

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