A Study on Improvement of Stock Investment Tax System
Asian Tax Journal Vol. 20 No. 5 (2019), pp. 105-127
Abstract
The Securities Transaction Tax has been taxed without changing the tax rate since 1996, while the taxable scope of the Capital Gains Tax continues to expand, and there is a growing debate that the Securities Transaction Tax(Hereinafter referred to as “STT”) should be abolished or lowered. If the transferer actually pays both the STT and the Capital Gains Tax(Hereinafter referred to as “CGT”) on the same stock transaction, it could be economic double taxation. In addition, despite the expansion policy of the CGT, there are insufficient tax policy considerations on the Accumulated income for the same type and tax rate structure. The current income tax system needs to be improved as follows because the tax neutrality caused by discrimination taxation by financial products and financial income is undermined. First, it is reasonable to set the policy direction to reduce the weight of the STT or to abolish and to increase the CGT it in the medium to long term. The STT is more tax revenue－oriented than the purpose of introduction, and it may undermine the efficiency and tax equity of the capital market. If the taxable scope of the CGT is expanding, it is necessary to abolish or cut the STT. Second, in order to maintain the systematic consistency of the CGT, the Tax Neutrality between income of stocks and stock－related derivatives should be improved through profit and loss between stocks and stock－related derivatives and the same tax rate. In order to resolve the tax inequalities between investment periods, it is necessary to allow a carryover deduction, such as carrying forward a deduction for a certain period on the loss of the transfer of shares. Third, in the mid－ to long－term, Korea should also consider introducing a tax reform, that is a Dual Income Tax System, which expands the scope of income taxation on financial products, while also reducing the tax rate and operating profit and loss.
Keywords
- Stock investment tax
- Economic double taxation
- Tax neutrality
- Dual income tax system
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