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South Korea to tax futures and options
09 August 2012
The country’s equity derivatives market could be threatened
South Korea’s equity derivatives market could suffer as plans were announced on Wednesday to introduce a transaction tax on index futures and options from January 2016.
According to a revised tax bill from the ministry of strategy and finance, a 0.001% tax will be imposed on the value of futures contracts linked to the KOSPI 200 index, and a 0.01% tax will be charged on the premiums of options. The ministry expects to take in $89m from the tax.
Index futures and options account for around 96% of derivatives trades on the Seoul bourse. The ministry said the tax would promote fairness in taxation given that other financial products and earned income have already been taxed. A tax of 0.3% to 0.5% is currently imposed on share transactions.
The proposal follows the French government’s introduction of a 0.2% levy on financial transactions. There have long been calls for a Europe-wide financial transactions tax but it has never been realised due to opposition from several countries including the UK.