South Korean stocks suffered their sharpest drop since early April on Friday, after the government unveiled plans to boost taxes on companies and equity investors to increase fiscal revenue.
The Kospi index led regional declines, plunging as much as 3.1%, with major names like SK Hynix Inc. and Hanwha Aerospace Co. weighing heavily on the market.
Under a proposal introduced by Seoul’s finance ministry on Thursday, the capital gains tax threshold for stock holdings would be slashed to 1 billion won ($723,312) from the current 5 billion won, and the stock transaction tax would rise to 0.2% from 0.15%.
The top corporate tax rate is also set to increase to 25% from 24%, rolling back a reduction made by the previous government, while all corporate tax brackets would see a 1 percentage point hike.
Namho Kim, general manager at Timefolio Investment Management in Seoul, noted that the lower threshold for capital gains tax could greatly expand the pool of taxable investors, heightening concerns that increased selling pressure could hit the market.
