Tags: South Korea to Prepare More Capital Steps by Year’s End

South Korea to Prepare More Capital Steps by Year’s End

Friday, 19 Nov 2010 12:58 PM

South Korea plans to prepare additional measures to reduce sharp swings in capital flows by the end of this year, following legislative steps to re-impose a tax on foreign bond holders.

Vice Finance Minister Yim Jong-yong told Reuters on Friday the government also prefers the option of imposing flexible withholding tax rates on foreigners' local bond investments, the approach included in one of two bills that ruling party members introduced to the National Assembly last week.

"We are planning to complete it within this year," Yim said on the sidelines of the Asian Development Cooperation Meeting, when asked about additional measures to contain sharp swings in capital flows and the won.

On Thursday, he said the government would unveil further measures on capital flows if necessary, which might include a bank levy and limits on foreign exchange forward positions held by banks.

The remarks came after the ministry issued a statement to say it would support lawmakers' bills to re-impose a withholding tax on foreigners' bond investments, in a move seen as helping speed up the process of passing one of the tax bills at parliament.

"We prefer a flexible tax rate so we can quickly deal with changes in the situation," Yim said.

A ruling party member submitted a bill last week to the National Assembly to reintroduce a 14 percent withholding tax on capital gains earned by foreign investors from holdings of domestic treasury and monetary stabilization bonds.

Another lawmaker from the ruling Grand National Party has also submitted a similar bill to parliament, calling for a flexible tax rate on foreign bond holdings.

Meanwhile, Yim said the government will not consider any measures to slow foreigners' stock investments, adding that stock funds and bond funds were different.

Some market players speculate the government may impose regulations on foreigners' stock investments if controls on bonds cause foreign investors to shift into emerging market equity, pushing up the won.

© 2017 Thomson/Reuters. All rights reserved.

   
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South Korea plans to prepare additional measures to reduce sharp swings in capital flows by the end of this year, following legislative steps to re-impose a tax on foreign bond holders. Vice Finance Minister Yim Jong-yong told Reuters on Friday the government also prefers...
South Korea to Prepare More Capital Steps by Year’s End
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2010-58-19
Friday, 19 Nov 2010 12:58 PM
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