Korean VAT on financial services proposal
- 18 August 2014 | Richard Asquith
Korea is proposing to introduce VAT on financial services at 10% from July 2015.
This will include banking, insurance, credit and factoring-related services. Few countries around the rest of the world attempt to levy VAT on financial services because of the practical difficulties of determining the value added through the chain of supply.
EU Financial Transaction Tax struggles
The European Union has long failed to introduce VAT on banking and insurance, despite many draft Financial Services VAT Directives. In 2012, 11 member states opted to propose a Financial Services Tax on trading of shares, debt and derivatives. However, there has been difficulty gaining consensus on politically-charged issues such as taxing trades of financial instruments of businesses within the 11 countries that are conducted outside of the countries. The UK unsuccessfully attempted to block this extra-territorial element to the FTT at the European Court of Justice this year.
Slovenia, one of the "FTT-11" has now dropped out of the proposal in May. It believes the latest draft proposals would prove uneconomic to administer because the tax base has been shrunk.