ID :
198301
Sun, 07/31/2011 - 09:03
Auther :
Shortlink :
https://oananews.org//node/198301
The shortlink copeid
S. Korea to impose bank levy on foreign borrowing this week
SEOUL (Yonhap) - South Korea will begin imposing a tax on banks' non-deposit foreign borrowing from this week in a bid to prevent excessive capital flows from hurting the nation's financial and economic stability, the finance ministry said Sunday.
The move comes after the government announced last December that it will start to impose a tax on foreign borrowing from the second half of this year to regulate excessive capital movement.
According to the ministry, the government will begin imposing a bank levy of 0.2 percent from Monday on short-term non-deposit liabilities with a maturity of less than one year.
Borrowings with a maturity of one to three years will face a 0.1 percent tax rate, while the rate for liabilities that mature in three to five years and more than five years will be 0.05 percent and 0.02 percent, respectively, the ministry said.
Subject to the new tax imposition are 13 local banks and 37 branches of foreign lenders along with such state banks as the Korea Development Bank, Export-Import Bank of Korea, Industrial Bank of Korea and Korea Financial Corp.
A bank levy has been regarded as a tool to protect a nation's financial system from excessive capital flows by imposing taxes on debts held by banks.
South Korea has been pushing to enforce the tax scheme in order to avoid the repeat of market turbulences it suffered in recent history due to the abrupt outflow of hot money.
Hot money is cited as the main reason for market turbulence and swings in currency value here, which experts worry could jeopardize the nation's economy and financial system despite solid fundamentals.
The move comes after the government announced last December that it will start to impose a tax on foreign borrowing from the second half of this year to regulate excessive capital movement.
According to the ministry, the government will begin imposing a bank levy of 0.2 percent from Monday on short-term non-deposit liabilities with a maturity of less than one year.
Borrowings with a maturity of one to three years will face a 0.1 percent tax rate, while the rate for liabilities that mature in three to five years and more than five years will be 0.05 percent and 0.02 percent, respectively, the ministry said.
Subject to the new tax imposition are 13 local banks and 37 branches of foreign lenders along with such state banks as the Korea Development Bank, Export-Import Bank of Korea, Industrial Bank of Korea and Korea Financial Corp.
A bank levy has been regarded as a tool to protect a nation's financial system from excessive capital flows by imposing taxes on debts held by banks.
South Korea has been pushing to enforce the tax scheme in order to avoid the repeat of market turbulences it suffered in recent history due to the abrupt outflow of hot money.
Hot money is cited as the main reason for market turbulence and swings in currency value here, which experts worry could jeopardize the nation's economy and financial system despite solid fundamentals.
