[Park Jun-dong Column] Tax-free Zone, Coin Market

Unlike stocks, there are no transaction·capital gains taxes

Solutions should be sought considering fairness and tax revenue

Park Jun-dong, Editorial Writer

Among the '2025 tax reform measures' announced last July, the measure that faced relatively less opposition was the increase in the securities transaction tax. When selling stocks, investors currently pay 0.15% in taxes including the Rural Development Special Tax; the gist is to raise this to 0.2% from next year. The concurrently proposed corporate tax increase sparked controversy over increased burdens on companies and the issue of double taxation, and the education tax increase drew opposition from the financial sector. The plan to tighten the major shareholder threshold for imposing stock capital gains tax from '5 billion won per stock' to '1 billion won per stock' was withdrawn due to investor opposition.

There is little opposition to raising the securities transaction tax because the rate has been steadily lowered over time and the introduction of stock capital gains tax (financial investment income tax) has been shelved. The government viewed that not imposing capital gains tax in the stock market and levying a transaction tax on each trade was not in line with global standards, and began discussions in 2018, finalizing the decision to introduce the Financial Investment Income Tax in 2020. Prior to that, starting in 2019 it began lowering the securities transaction tax from 0.3% to 0.25% and continued cuts almost every year, applying 0.15% this year.

Instead of lowering the transaction tax, it was decided to impose the Financial Investment Income Tax (including local income tax, rate 22~27.5%) from 2023 on annual trading gains exceeding 50 million won. However, the implementation was postponed once to 2025, and at the end of last year it was decided not to introduce the system at all. Thus, tax authorities concerned about revenue could only argue to raise the securities transaction tax, and it is true that investors have no grounds to oppose it.

Unlike the stock market, the virtual asset market is a 'tax-free zone' with neither capital gains tax nor transaction tax imposed. There were plans to impose capital gains tax, but they were postponed three times. The bill to tax annual coin trading gains exceeding 2.5 million won at 22% was prepared in 2020 and scheduled to take effect in 2022, but was delayed to 2023, 2025, and 2027.

Transaction tax is not levied because the government still does not regard coins as financial investment products. There are times when daily trading volume reaches tens of trillions of won, and while other countries have even allowed coin-related spot and futures exchange-traded funds (ETF), regulatory adjustments in Korea have been slow. As a result, coin investors enjoy special treatment of tax exemption. The issue of fairness with stock investors is quite serious. This controversy does not occur abroad. Major countries, including the United States, Japan and Germany, do not levy transaction taxes on coins but do impose capital gains tax. They treat coins the same as stocks across tax law.

Coin capital gains tax is scheduled for 2027, but whether it will be implemented as planned is uncertain. This is because each year ahead of the coin capital gains tax enforcement, coin investors have protested—such as submitting opposition petitions to the National Assembly and the presidential office bulletin board—and this has worked so far. There is dissatisfaction asking why coins are taxed while stocks are not. The same scene is expected next year.

The majority of experts view a tax system that levies capital gains tax as more desirable for both stocks and coins. This is because a transaction tax is a one-sided levy applied even when there are losses, whereas capital gains tax is not imposed if there is no profit. However, it is an undeniable reality that imposing capital gains tax is difficult due to investor backlash and political calculation of voter sentiment.

Then wouldn't it be appropriate to impose a transaction tax on coins at an appropriate level, as with stocks? It would also be a way to fill the country's empty treasury even a little. Tax authorities also reviewed imposing a coin transaction tax in 2017, considering fairness and tax revenue. The coin market should not be left forever as a tax blind spot.