Kwak Yeon-soo is a digital editor at The Korea Times creating, editing and curating digital content for the newspaper’s website, mobile app and social media. She previously covered a diverse array of cultural, political and business topics.
Rival parties divided over financial investment income tax scheme
Jung Eui-jung, second from left, leader of Korea Stockholders Alliance, a group representing retail investors, holds up a placard that reads "Abolish financial investment income tax" ahead of the main opposition Democratic Party of Korea's policy debate at the National Assembly, Tuesday. Yonhap
By Kwak Yeon-soo
DPK debates delaying or implementing unpopular tax
Rival parties remain divided over the government’s plan to abolish the financial investment income tax, which is scheduled to take effect in January next year, according to political watchers, Tuesday.
In January, President Yoon Suk Yeol pledged to scrap the envisioned tax scheme to help promote investments in Korea’s stock market.
The upcoming tax scheme is designed to impose a 20 percent charge on total income derived from financial products, including stocks, bonds, funds, and derivatives, that exceeds 50 million won ($37,513). A higher rate of 25 percent will apply to earnings surpassing 300 million won.
The plan won bipartisan support in parliament in 2020, but was postponed until January next year due to strong objections by retail investors.
The main opposition Democratic Party of Korea (DPK) has opposed the abolition of the financial investment income tax, labeling it a "tax cut for the rich" despite falling tax revenue and a fiscal deficit. However, some DPK members have advocated for reconsidering the new tax scheme, emphasizing the need to weigh its advantages and disadvantages.
As a result, the DPK held an open policy debate on Tuesday, exploring various scenarios, including the implementation or delay of the financial investment income tax.
Those calling for a delay in implementing the financial investment income tax voiced concerns about its effects on investors.
“Back in 2020, the ruling and opposition parties agreed on the plan under the condition of boosting the stock market and protecting investors. Unlike the U.S. or Japan, Korea’s stock market faces a bumpy road to recovery. There is an outflow of equity funds. Therefore, we must prioritize raising the value of our stock market,” Rep. Kim Hyun-jung of the DPK said.
On the other hand, those supporting the plan's timely implementation argued that the new tax scheme will strengthen the capital market system. They claimed that most retail investors need not be concerned about the taxation.
“Many fear that stocks will plummet as large investors exit the Korean market. However, Korean stocks are currently undervalued compared to their global peers, largely due to the irrational nature of the Korean stock market,” Rep. Kim Young-whan of the DPK said.
“The financial investment income tax will lower transaction costs and increase the investment attractiveness of Korea’s capital market,” Kim added.
Following the policy debate, the DPK will hold a policy meeting to gather party input and build consensus, according to Rep. Jin Sung-joon, the opposition party’s chief policymaker.
Ruling People Power Party Chairman Han Dong-hoon, left, poses with Jung Eui-jung, leader of Korea Stockholders Alliance, after receiving a petition calling for abolition of the financial investment income tax at the National Assembly in Seoul, Tuesday. Yonhap
Meanwhile, ruling People Power Party (PPP) chief Han Dong-hoon met with the Korea Stockholders Alliance, a group representing retail investors, and reiterated his support for abolishing the financial investment income tax.
“The DPK is currently engaged in a confusing role-playing game, with factions divided between those supporting tax implementation and those advocating for a delay, while the option of tax abolition is excluded from discussion. They seem to be ignoring public opinion and attempting to mislead people. We demand that the DPK take a stance that fully addresses investor concerns and frustrations,” Han said.
“The DPK's push to implement the foreign investment income tax is akin to a flyweight fighting a heavyweight — it's an uneven match where the flyweight can never prevail. Delaying the implementation will only create more confusion in the financial market,” said Jung Eui-jung, leader of Korea Stockholders Alliance.