South Korea Raises Transfer Tax Threshold to Stabilize Stock Market

South Korean Government Raises Transfer Tax Threshold for Major Shareholders

The South Korean government has announced an increase in the tax threshold for major shareholders’ transfer tax from 100 billion won to 500 billion won. This decision aims to address concerns from individual investors who criticize the practice of major shareholders selling stocks at the end of the year to avoid transfer taxes, which leads to a decline in stock prices.

Background and Rationale

The transfer tax rate for major shareholders holding stocks worth more than 1 billion won is currently set at 25%. To prevent major shareholders from engaging in such practices and to stabilize the stock market, the government plans to increase the threshold to 500 billion won. This adjustment is expected to reduce selling pressure and ensure market stability.

Impact on Investors and Market

Individual investors view the increase in the transfer tax threshold positively, as it aims to discourage major shareholders from engaging in behavior that negatively affects stock prices. However, the effect on supporting stock prices remains uncertain. Some experts argue that the annual year-end decline in stock prices may not be significantly influenced by policy changes, as it has become a learned behavior.

Furthermore, there are differing opinions regarding the impact of this threshold adjustment. While some believe it may primarily benefit a small number of wealthy individuals, others argue that it may have a limited impact on the overall stock market.

Relation to Other Measures

This decision follows the government’s ban on short selling implemented in October. The combination of these measures raises concerns about their potential impact on the upcoming general elections and the overall stability of the stock market.

Response and Monitoring

Despite the government’s announcement, the stock market closed lower on the day of the announcement, indicating mixed reactions from investors. The impact of this policy on the stock market and the upcoming general elections will be closely monitored.

In conclusion, the South Korean government’s decision to raise the transfer tax threshold for major shareholders aims to reduce selling pressure and stabilize the stock market. While individual investors welcome this change, its effect on supporting stock prices remains uncertain. The impact of this policy on the stock market and the upcoming general elections will be closely monitored.