President hints at scrapping plan to lower major shareholder tax threshold

President Lee Jae Myung speaks during a press conference marking his 100 days in office at Cheong Wa Dae in Seoul, Thursday. Joint Press Corps

President Lee Jae Myung on Thursday showed willingness to withdraw the government’s controversial plan to tighten the major shareholder threshold for capital gains tax, after facing protests over the plan to lower it from 5 billion won ($3.6 million) per stock to 1 billion won.

He indicated that the current standard would remain in place.

The retreat follows a strong backlash from retail investors, opposition parties and even members of his own Democratic Party of Korea (DPK).

“The stock market is driven by sentiment,” Lee said during a press conference marking his first 100 days in office. “Since revitalizing the market is a central pillar of this administration’s economic agenda, if tightening the capital gains tax would pose an obstacle, I see no need to insist on it.”

The Ministry of Economy and Finance unveiled the tax reform plan in late July, aiming to enhance tax fairness and boost revenue. The plan included lowering the major shareholder threshold for the capital gains tax. However, concerns grew that ordinary investors could also fall under the major shareholder category and therefore face trading restrictions and higher tax liabilities.

More than 140,000 people signed a petition to the National Assembly opposing the change, and criticism also gained traction across political circles.

Withdrawing the plan to tighten the capital gains tax threshold would cause a potential revenue shortfall of around 200 billion won to 300 billion won, an amount that Lee evidently considers to be more manageable than a possible market disruption resulting from lowering the threshold.

Following his remarks, the current 5 billion won threshold is likely to remain, as Lee said the decision should rest with the Assembly, where both the ruling and opposition parties oppose tightening the standard.

President Lee Jae Myung's press conference marking his 100 days in office takes place at Cheong Wa Dae in Seoul, Thursday. Joint Press Corps

Meanwhile, Lee emphasized the importance of revising the Commercial Act, clarifying that the goal is not to constrain companies but to hold “unfair executives and certain controlling shareholders” accountable.

He also described the reforms as measures that “help save companies and protect the vast majority of minority shareholders,” while also benefiting the national economy.

On July 3, the DPK pushed through the first amendment to the Commercial Act, expanding directors’ fiduciary duties to cover both the company and its shareholders. On Aug. 25, the party passed a second revision, requiring listed companies with assets exceeding 2 trillion won to adopt cumulative voting.

Business circles and the opposition party have expressed concerns that the revisions pose significant challenges to management rights.

The president, however, affirmed that his administration will pursue further amendments to improve corporate governance, highlighting the “imbalance” in which controlling shareholders wield disproportionate influence despite typically holding only 20 to 30 percent of shares.

In line with Lee’s intention, the DPK is now moving to push forward a third amendment that would make the cancellation of treasury shares mandatory.

Regarding concerns over the government’s expansionary fiscal policy, Lee described it as an “unavoidable step to achieve a turning point.”

He made the remarks in response to concerns that issuing more than 100 trillion won in government bonds to support economic recovery and R&D investment might excessively undermine fiscal soundness.

“By using the 100 trillion won in debt to generate even greater returns, repayment is fully manageable, so this is the right time to take such measures,” Lee said.