A ruling party lawmaker has motioned a bill proposing cut in the tax on securities trade in Korea claiming the relatively high levy has played a damper to local market.

The ruling Democratic Party lawmaker Kim Byung-wook said Thursday the bill proposes to securities transaction tax to 0.15 percent, from maximum rate of 0.5 percent and effective rate of 0.3 percent. Kim said the levy has served as a stumbling block in the capital market.

Retail investors have long complained of the levy. Among Organization for Economic Cooperation and Development (OECD) members, 16 economies including the U.S. Japan and Germany do not tax each securities trade. Financial Services Commission (FSC) chairman Choi Jong-ku also recently argued for abolishment of the tax.

Kim also added that the levy runs counter to the basic principles of taxation requiring tax to be applied to income generation, because the tax is imposed on every purchase and sale of securities regardless of whether the transaction generates profit or not. About 70 percent of the levy is paid by retail investors who made small amount of stock transactions frequently.

The Ministry of Economy and Finance cannot easily agree to the removal of the tax as it accounts for a large share in the entire tax revenue. Tax revenue from securities trade amounted to 6.28 trillion won ($5.6 billion) as of 2017, or 2.4 percent of total tax revenue. A 0.1 percentage point cut would shave tax income by 2.1 trillion won.

By Kim Hyo-sung and Choi Mira

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