The government has released what it calls the "stock-price suppression prevention act" to stop controlling shareholders facing inheritance or gift taxes from artificially pushing down share prices. Expectations are that it will put the brakes on expedients that damage corporate value—such as temporarily depressing prices to reduce tax burdens, dual listings, or issuing exchangeable bonds (EB).
However, compared with the original bill floated in political circles, the scope of application and the level of penalties have been reduced, and some note that continuing to use share prices to value corporations still limits the policy's ability to spur tangible behavior changes at listed companies, such as bigger dividends or share cancellations.
According to the financial investment industry on the 5th, the Ministry of Finance's released "2026 tax reform plan" includes a provision to recalculate the value of listed shares by applying average prices over up to 6 years and 6 months, instead of the current method that uses the average share price for the two months before and after the inheritance or gift date.
Taxable targets are corporations whose price-to-book ratio (PBR) stayed in the bottom 25% of industry groups on the main bourse and the bottom 10% on the KOSDAQ market for 12 of the most recent 13 half-year periods. Corporations that saw their share price plunge more than 30% from the three-year average after a dual listing or issuing exchangeable bonds (EB) within the past year are also included.
For such long-term low-PBR corporations, the government decided to levy inheritance and gift taxes by applying, as the valuation for listed shares, the higher of 1.3 times the current assessed value or the highest figure among long-term average prices. The intent is to block controlling shareholders from gaming the system by suppressing share prices to reduce inheritance or gift tax burdens.
Previously, a revision bill proposed last year by Lee So-young of the Democratic Party of Korea centered on valuing the share prices of listed companies with a PBR below 0.8 not at market prices but by asset value and earnings value, and setting 80% of net worth as the valuation floor. It would have scrapped the 20% inheritance and gift tax surcharge on largest shareholders to lower the overall tax burden, while instead blocking gains obtained by deliberately keeping share prices low.
By contrast, the government plan removes the absolute "PBR 0.8" threshold and the net-worth floor, and adopts sector-relative evaluation and a long-term average price method. While it reduces side effects from uniform regulations by considering sectoral PBR characteristics, many say the policy's effectiveness and impact have retreated sharply compared with the lawmaker's bill.
◇ While it fixed uniform standards… the scope of application and penalties shrank
First, the scope of the policy's impact has narrowed significantly compared with the initial plan. As of the 4th, 1,291 listed companies—47.5% of the total—had a PBR below 0.8, but a Korea Exchange (KRX) simulation found only about 120 corporations met the new long-term low-PBR criteria. Even including the dual-listing and EB issuance conditions, the government estimates roughly 200 targets.
A key point of the effectiveness debate is that share prices are still used to value corporate worth. While a long-term average method may work for corporations that pushed prices down in the short term, companies with depressed prices for years are unlikely to see their assessed values rise much even if the assessment period is extended.
Eom Su-jin, a researcher at Hanwha Investment & Securities, said, "Whether you average prices over four months or over two or three years, there is a high likelihood that a 'new, suppressed market price' will reign as the yardstick for valuing the company."
Some also say that for long-term low-PBR corporations, even if multiple periods' average prices are compared, the amount with a 30% add-on to the current assessment (the premium) is likely to be the highest. Eom said, "These are corporations whose PBRs have already been weak for a long time, so even if you include prices from that period as options for valuing the company, those options will likely just be window dressing."
Weaker penalties than those in the original bill are also cited as a factor that makes it hard to drive changes in corporate behavior. The original plan set a valuation floor at a PBR of 0.8, creating a structure in which the lower the PBR fell, the higher the tax valuation rose. The government plan, by contrast, is built around a 30% premium on the current assessed value and long-term average prices.
Kang Jin-hyeok, a researcher at Shinhan Investment & Securities, analyzed, "It is hard to distinguish structural low PBRs from intentional price suppression, and the low penalties, price-based criteria, and longer assessment horizon could actually create incentives that make price suppression chronic."
◇ Burden of proof on corporations… possibility of exclusion due to temporary price rises
Another concern is that the tax authority's discretion may become excessive. Corporations that meet the presumption criteria must explain on their own that they did not artificially suppress share prices. If they fail to prove this, the National Tax Service's Valuation and Deliberation Committee will directly decide whether price suppression occurred and how to assess inheritance and gift taxes.
Eom said, "With the 'PBR 0.8' threshold removed, the likelihood of a sharp jump in tax burden has already fallen considerably, so it is puzzling why the tax authority would decide on a case-by-case basis whether price suppression occurred and what the tax amount should be." She noted that without specific deliberation standards, tax predictability could decline.
Many also say it falls short of inducing sustained share-price support. While adopting sector-relative evaluation and giving corporations a chance to explain is positive, a minimum 30% premium applied to long-term low-PBR corporations alone is unlikely to drive substantive shareholder returns such as bigger dividends, share cancellations, or efficient capital allocation.
Jeong Da-som, a researcher at Korea Investment & Securities Co., said, "The government plan may help reduce incentives to artificially suppress prices, but its impact on the capital market is limited because it does not provide incentives to lift prices through active IR activities, shareholder returns, or efficient capital allocation."
Jeong explained, "For perpetually undervalued corporations, the 30% premium removes incentives to support prices, and even if prices rise only around the two half-year PBR reference dates within the 6.5-year window due to a temporary favorable factor—not improvements in fundamentals or expanded shareholder returns and communication—they could be excluded from the low-PBR group," adding, "It is hard to expect sustained efforts to enhance corporate value."