[Economic Outlook] VAT and Other Tax Law Amendments Released... Q2 Growth Rate Announcement

Q2 Likely to Stay in -2% Range
Government Confirms Financial Investment Taxation Plan
SPV Corporate Bond Purchases to Begin on 24th

[Asia Economy Reporter Moon Chaeseok] Tax law amendments related to value-added tax, virtual currency, and tobacco will be disclosed. The outline of the second-quarter economic growth rate reflecting the impact of the novel coronavirus infection (COVID-19) will also be revealed.

The government will announce the '2020 Tax Law Amendment' on the 22nd. The tax laws to be revised throughout the year will be introduced all at once.

This year, the focus is on overcoming the damage caused by COVID-19 and strengthening the economic growth momentum in the post-COVID era.

Tax reform plans related to changes in the simplified value-added tax criteria, the Individual Savings Account (ISA) system reform, strengthening virtual asset taxation, and tobacco tax supplementation will be disclosed.

[Image source=Yonhap News]

The government plan for financial tax reform to revitalize financial investment will also be finalized.

Earlier on the 17th, President Moon Jae-in instructed, "The financial tax reform plan should not shrink the stock market or dampen the enthusiasm of individual investors."

The financial investment industry believes that the government may consider adjusting the taxation threshold for financial investment income.

However, even if the government prepares a plan, it can be amended by the National Assembly.

On the same day, Statistics Korea will announce the results of the supplementary survey on the youth population from the May Economically Active Population Survey.

This will allow us to examine how much the youth employment market has worsened amid the COVID-19 situation.

[Image source=Yonhap News]

The Bank of Korea will release the preliminary value of the real Gross Domestic Product (GDP) growth rate for the second quarter of this year on the 23rd.

It is expected to gauge the extent of the damage the Korean economy has suffered due to the COVID-19 crisis.

Earlier, on the 2nd of last month, the Bank of Korea announced that the real GDP growth rate for the first quarter (compared to the previous quarter) was -1.3%.

It also predicted that the second-quarter real GDP growth rate would remain in the low -2% range.

This estimate was based on the Bank of Korea's forecast for the first half of this year (compared to the same period last year) of -0.5%.

Governor Lee Ju-yeol of the Bank of Korea also forecasted right after the Monetary Policy Committee meeting on the 16th that "this year's GDP growth rate is expected to fall below the May forecast (-0.2%)."

This is why the preliminary second-quarter growth rate could be lower than the low -2% range.

Starting from the 24th, the Bank of Korea will begin purchasing corporate bonds and commercial papers (CP), including low credit ratings, through a special purpose vehicle (SPV).

The SPV mainly purchases non-investment grade bonds (A to BBB ratings).

The maturity of the purchased securities is within 3 years for corporate bonds and within 3 to 6 months for CP.

This content was produced with the assistance of AI translation services.