South Korea is planning to introduce taxes on the earnings of foreign investors from foreign currency bonds, called kimchi bonds, sold in the country, Financial Times reports. The move comes as South Korea seeks to reduce rising short-term external debt and counter capital inflows.

After the proposal wins parliamentary approval, foreign investors will have to pay a 14 percent tax on interest income from kimchi bonds, beginning in 2012. Currently, domestic banks are required to pay a 14 percent rate of tax on interest income earned on FX-denominated debt sold within the country, adds Reuters. A tax on profits from some derivatives products, such as yen-swap deposits, may also be imposed from next year.

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