South Korean President Yoon Suk Yeol speaks during a ceremony held to celebrate the 74th anniversary of the end of the 1950-1953 Korean War, in Daegu on June 25, 2024.
Ahn Young-joon | Afp | Getty Images
South Korean President Yoon Suk Yeol has announced tax cuts for companies that increase capital returns to shareholders under a “company value enhancement program.”
Speaking ahead of the government’s two-year economic policy announcement, Yoon said this tax benefit will reward companies that “actively expand dividends and push for (a) low-level separate tax on shareholders’ dividend income tax,” according to a Google translation.
“We will establish and spread value programs that increase the value of the company and provide opportunities for asset formation for the public,” he said.
Yoon was referring to the country’s financial regulatory agency’s “company valuation program,” which aims to boost undervalued local markets.
The South Korean market as a whole is consistently undervalued due to various factors including unclear corporate governance practices and low dividend payouts, leading to a phenomenon known as the “Korean discount.”
The value increase program aims to prioritize shareholder returns through incentives including tax benefits, and “encourage listed companies to voluntarily prepare and disclose value enhancement plans,” according to the Financial Services Commission.
Yoon also announced other measures including a 25 trillion won ($17.98 billion) support package for small businesses, which he said are “still in a difficult situation.”
He said “amid persistently high interest rates, the interest burden is increasing, while wage and rental costs are also rising,” according to a Reuters translation.
South Korea’s central bank has kept its benchmark interest rate at 3.5% from January 2023, a 15-year high.
