8th Meeting of Central Economic Response Headquarters
25th Ministerial Meeting on the Economy
Government to Improve Financial Sector Taxation
Deputy Prime Minister Hong Nam-ki presided over the 8th Meeting of the Central Economic Response Headquarters, that is the 25th Ministerial Meeting on the Economy, held on June 25. Plans to improve financial sector taxation were main topics of discussion. Mid- to long-term measures to support ever-increasing single-person households were also reviewed at the meeting. DPM Hong talked about IMF’s June World Economic Outlook Update at the beginning of the meeting.
The following is a summary of DPM Hong’s keynote address.
IMF’s World Economic Outlook Update
On June 24, the IMF updated the 2020 world economic outlook from a 3.0 percent drop to a 4.9 percent contraction, projecting a ‘synchronized deep downturn’ for both advanced and emerging economies. The outlook for the Korean economy has been revised down to a 2.1 percent drop for 2020 and 3 percent growth for 2021 in April. Although the figures are relatively high compared with other economies and the economy is predicted to be the only one among advanced economies to see a turnaround in 2021, restoring to a pre-crisis level, we will never be complacent and do our utmost for the economy to ride out the crisis without shrinking this year.
Korea Sales Event
The nationwide Korea Sales Event will be held for June 26 – July 12. I hope this event will be a catalyst to the current recovery trend, and ask Korean citizens to strictly follow personal hygiene guidelines while participating in the event.
Improve financial sector taxation
Investment, along with consumption, is what boosts an economy. As M2 surpassed 3,000 trillion won as of end of April for the first time in history, we need to promote sound investment. The government will improve financial sector taxation to be simple and fair enough to promote investment in financial products. The new financial sector taxation will
- Impose a revenue-neutral flat tax on all capital gains
- Deduct losses made in the last three years from the gain
- Not impose taxes on up to 20 million won a year capital gains made from stock transactions
- Gradually lower stock transaction taxes to be revenue-neutral: Lower the stock transaction tax by 0.1 percentage points over 2022 and 2023, making it 0.15 percent in 2023
The new taxation will be finalized in July and included in the 2020 tax revision bill.
Topics of discussion
1) Plans to improve financial sector taxation
2) Mid- to long-term measures to support single-person households
The country’s single-person households have been increasing to take 30 percent of total households in 2020, and the government has been working on the redesigning of the government policies of which the focus has been on families of four. The single-person household support will cover the five areas of income security, housing, safety, social relationships and markets.
- Income security: Draw up plans to ensure basic social security benefits in August
- Housing: Promote shared housing
- Safety: Ensure safety for woman households
- Social relationships: Reduce the risk of lonely deaths among elderly households
- Markets: Promote markets for a ‘solo economy’