Raised shareholder returns to mean lowered corporate taxes

The government will reduce corporate taxes for companies that work to boost shareholder returns in a bid to resolve the "Korea discount" issue.

Finance Minister Choi Sang-mok speaks during a conference with experts and industry officials in the financial sector on market improvement measures held in central Seoul on Tuesday. [YONHAP]

The government will reduce corporate taxes for companies that strive to enhance shareholder returns, the finance minister said Tuesday.

The move is part of the government’s recent initiative to resolve the so-called Korea discount, the chronic undervaluation of local stocks.

“To incentivize more companies to get on board with enhancing shareholder returns, the government will reduce the corporate tax burden on companies,” said Choi Sang-mok, minister of economy and finance and deputy prime minister, during a conference held in the government complex in central Seoul on Tuesday.

“Details regarding recipients [of the tax benefit] and support measures will be decided after listening to various opinions and running simulations,” Choi added.

Possible measures discussed during the conference include reducing corporate taxes in proportion to increases in shareholder returns, such as through dividend payments or treasury stock cancellations. The government is also considering reducing taxes levied on dividend incomes for investors.

The Finance Ministry plans to further refine the tax incentive program by July.

In February, Korea’s financial authorities outlined the framework for the voluntary “Value-up” program aimed at eliminating the Korea discount, urging public companies to improve the transparency of their governance structure and shareholder return policies. The Financial Services Commission is mulling a revision to stewardship code — a set of standards for institutional investors to protect their investments on behalf of their clients — as well, to encourage companies to join the program.

“[The government] will also continue to proceed with other tasks, including an amendment of the Commercial Act and structural reform in foreign exchange market,” the finance minister said.

BY SHIN HA-NEE [shin.hanee@joongang.co.kr]