The government is planning to open a gold exchange in 2014 and impose stricter control on underground gold transactions, as part of ongoing efforts to encourage legitimate gold trading. According to the FSC, underground gold trading accounts for more than half of Korea’s annual gold transactions, and has been a major channel for tax evasion. It is estimated that about 300 billion won in value-added taxes is lost each year due to illegitimate gold transactions. A spot market for gold will be created in the KRX, where gold will be traded like listed stocks. Financial institutions and gold-related businesses that fulfill certain financial criteria will be allowed to participate in the market. In order to stimulate trading in the new market, various tax incentives will be provided, such as reducing corporate and income taxes and temporarily eliminating trading commissions. The government will make the necessary systematic and legal preparations for the rest of the year to ensure that the gold exchange opens in the first quarter of 2014. Meanwhile, as part of a push to prevent tax avoidance, issuing cash receipts will become mandatory for all gold retailers starting in 2014. Also, tax offices will scrutinize gold businesses more thoroughly, while customs authorities will reinforce monitoring on gold smuggling activities. By operating a public market while at the same time cracking down on underground transactions, the government will improve the transparency and efficiency of the gold market.

* Source : Ministry of Strategy and Finance and Korea Development Institute, Economic Bulletin Vol.35 No.8 (August 2013).  
Website: http://english.mosf.go.kr