Government: "Reduction of Securities Transaction Tax Exemption Benefits Enhances Market Efficiency"

Trading Concentrated on Blue-Chip Stocks... Tax Support Targets Adjusted
"No Issues with Market Trading for General Investors"

[Image source=Yonhap News]

[Asia Economy Reporters Jang Se-hee, Moon Chae-seok] The government expects that the reduction in the exemption scope of securities transaction tax on stock transfers by market makers could enhance market efficiency.

According to the "2020 Revised Tax Law Follow-up Enforcement Rule Amendment" announced by the Ministry of Economy and Finance on the 9th, from April this year, market makers will no longer receive securities transaction tax exemption benefits when transferring stocks with a market capitalization of over 1 trillion won and a turnover rate in the top 50% or higher.

Contrary to the system's original purpose of supporting market making for stocks with low liquidity, since trading has concentrated on large-cap blue-chip stocks, the tax support targets have been adjusted accordingly.

Ko Kwang-hyo, Director of Income and Corporate Tax Policy at the Ministry of Economy and Finance, responded to concerns that the reduction in securities transaction tax exemption might hinder market efficiency by stating, "Since the exemption is limited to stocks with sufficient trading volume, market efficiency can be enhanced." He added, "There is no problem for general investors' market transactions."

He also noted that since the trading volume of market makers accounts for less than 1% of the total trading volume in the stock market, the impact on the stock market is expected to be minimal.

He further explained, "Market makers operate under the securities market regulations according to the Capital Markets Act," and added, "Illegal short selling is not subject to securities transaction tax exemption."

Additionally, derivatives will be excluded from tax support if the trading volume ratio in futures and options markets is 5% or more, or if the annual trading volume exceeds 300 trillion won for futures or 9 trillion won for options.

Market makers are a system that enhances liquidity by quoting both buy and sell prices mainly for small-scale KOSDAQ companies and other stocks with sluggish trading. Currently, 22 securities firms have been designated as market makers.

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