The government of Lee Jae-myung contains a plan for its first tax reform that strengthens the standard for imposing capital gains tax on large shareholders to 1 billion won. In response, a petition opposing this measure has exceeded the requirement for submission within just one day.
According to the National Assembly on the 1st, a petition titled 'Opposition to lowering the capital gains tax for large shareholders' was submitted the previous afternoon. As of 2:05 p.m. that day, it had received 27,860 endorsements, achieving a rate of 56%. A public petition is referred to the relevant committee of the National Assembly if it exceeds 50,000 endorsements within 30 days of the petition's disclosure.
The petitioner stated that if the criteria for the capital gains tax on large shareholders is reverted from 5 billion won back to 1 billion won, there would inevitably be selling pressure to avoid large shareholder designation at year-end, ultimately resulting in a decline in the stock market.
He noted, 'If selling pressure compiled to avoid taxes floods the market every year-end, the KOSPI cannot rise like the U.S. does,' and claimed, 'It will fall back to a market where only theme stocks remain, as it was in the past.'
The petitioner mentioned that reverting the standard for large shareholders' capital gains tax would be even more unfair than the recently withdrawn Financial Investment Income Tax, as the latter aggregates total gains and losses, while the large shareholders' capital gains tax is based on holdings of stocks valued over 1 billion won.
The petitioner asked, 'Is paying taxes a crime just because one holds a lot of stock rather than earning money in the Director General (Korean stock market) in order?' He continued, 'If so, it's only natural that money will flow to the U.S. stock market.' He added, 'Please preserve the culture of long-term investment and the dream of a Ten-Bagger. Don't kick the ladder away at 1 billion won.'
Following the announcement of the 2025 tax reform plan, the KOSPI and KOSDAQ indices showed a sharp decline of over 3%, leading to a significant increase in the number of people agreeing with the petition.
The tax reform plan also includes provisions to tax 'decreased dividends'. If the amount of decreased dividends exceeds the acquisition cost of the stock, tax on dividend income will be levied only on 'large shareholders' for the excess amount.
Unlike typical dividends paid out from profits, decreased dividends are allocated by transferring capital reserves to retained earnings. Since this essentially involves returning the money shareholders previously invested, it has been exempt from taxation until now.
The government has also decided to raise the securities transaction tax rate, which was lowered based on the introduction of the Financial Investment Income Tax, by 0.05 percentage points. The rate for the KOSPI market will increase from 0% to 0.05%, while for the KOSDAQ market, it will rise from 0.15% to 0.2%. Considering the Special Tax for Rural Development (0.15%) imposed only on the KOSPI market, both markets will have a rate of 0.2%.
The tax reform plan also includes provisions to tax dividend income separately from total income. However, it is expected that this will apply only to listed companies with a dividend payout ratio of over 40%, or a payout ratio of over 25% that has increased their dividends by 5% compared to the last three years.
Additionally, the government proposed a maximum tax rate of 35% (excluding local income tax) for separate taxation of dividend income. This is lower than the current comprehensive income tax rate of 45%, but 10 percentage points higher than the maximum tax rate of 25% proposed by Lee So-young of the Democratic Party of Korea.
The 2025 tax reform plan will be finalized through discussions in the National Assembly and approval by the general meeting.