The Lee Jae-myung government has announced a tax reform plan to raise the current security transaction tax rate from 0.15% (including The Special Tax for Rural Development) to 0.20%. This means that the tax paid when selling 1 million won worth of stocks will increase from 1,500 won to 2,000 won.
The security transaction tax is a type of toll tax imposed every time an investor sells the purchased shares. It does not matter whether the seller made a profit or loss. As the security transaction tax rate rises, investment revenue is bound to decrease.
According to the tax reform plan announced by the government on the 31st, the tax rate applied to the KOSPI market will increase from 0% to 0.05%, and the rate in the KOSDAQ market will rise from 0.15% to 0.20%. Since an additional 0.15% The Special Tax for Rural Development will be added for KOSPI transactions, the security transaction tax for both KOSPI and KOSDAQ markets has increased to 0.20%.
The burden from the increase in the security transaction tax is expected to largely fall on individual investors. The Ministry of Economy and Finance noted that after lowering the security transaction tax through a financial tax modernization plan in 2020, "most of the benefits from the reduction in the security transaction tax are attributable to individuals," adding that "the proportion of tax revenue borne by individuals is about 70%."
Reversing the government's explanation, the burden from this increase in the security transaction tax will mostly fall on individual investors. Currently, individual investors account for 60% to 70% of domestic stock trading.
The government analyzed that raising the security transaction tax rate could secure about 12 trillion won in additional tax revenue over the next five years. Of this, the tax revenue that individuals trading stocks have to bear is estimated to be about 7 trillion to 8 trillion won, which can be interpreted as money taken from investors' pockets.
Experts point out that the increase in the security transaction tax does not simply increase the tax burden on investors. As the security transaction tax rises, the trading volume in the stock market is likely to decrease, and there is a significant possibility that liquidity inflow will decline. This would counteract President Lee Jae-myung's declaration to revitalize the stock market as an alternative investment means comparable to real estate.
Kiwoom Securities analyzed, "Looking at overseas cases, it was confirmed that trading volume in the stock market increased after the abolition of the security transaction tax." With the removal of the security transaction tax, trading costs decreased, leading to active arbitrage and allowing large institutional investors to utilize various investment strategies, resulting in positive effects.
Conversely, if the security transaction tax is increased, the stock turnover rate may decrease, leading to a significant drop in the vitality of the stock market. A representative from a securities company stated, "In short, it's like an increase in delivery fees," adding, "While an increase in delivery fees does not mean that online orders will stop immediately, overall trading will shrink compared to before, and the burden on investors will inevitably grow."