In reaction to the financial crisis and funding demand for welfare, increased attention has recently been given to derivatives transaction taxes (DTTs) as a means of 1) raising revenue for a variety of possible purposes, and 2) helping curb derivatives market excesses.
The derivatives market in Korea has grown gradually and rapidly. In terms of exchange-traded derivatives trading volumes, Korea ranks with the world's best. Although the market was exempt from income tax and transaction tax at the time of introduction, because of the successful growth and protection of the infant industry, it is still tax free.
DTTs have been under discussion in the National Assembly. Both the ruling party and the leading opposition agee on the introduction of DTTs, but it seems there are differences of opinion on tax rates. Last August 8, the government proposed a plan to tax KOSPI200-Futures and KOSPI200-Options at 0.001% and 0.01%, respectively.
For that reason, this report intends to analyze the effects of DTTs on derivatives using a transfer function model. It approached the issue by product due to structural differences between KOSPI200-Futures and KOSPI200-Options.
Chae Eun Dong
The derivatives market in Korea has grown gradually and rapidly. In terms of exchange-traded derivatives trading volumes, Korea ranks with the world's best. Although the market was exempt from income tax and transaction tax at the time of introduction, because of the successful growth and protection of the infant industry, it is still tax free.
DTTs have been under discussion in the National Assembly. Both the ruling party and the leading opposition agee on the introduction of DTTs, but it seems there are differences of opinion on tax rates. Last August 8, the government proposed a plan to tax KOSPI200-Futures and KOSPI200-Options at 0.001% and 0.01%, respectively.
For that reason, this report intends to analyze the effects of DTTs on derivatives using a transfer function model. It approached the issue by product due to structural differences between KOSPI200-Futures and KOSPI200-Options.
Chae Eun Dong