Debate is intensifying within the Democratic Party of Korea over the proposed changes to the stock capital gains tax criteria included in the first tax reform plan of the Lee Jae-myung government. Due to concerns that this could send mixed messages to the stock market, the party is expected to activate the 'Tax Normalization Special Committee' under the leadership of Representative Jeong Cheong-rae to start formal discussions.
Lee Un-joo, a senior member of the Democratic Party, stated on social media on the 3rd regarding the government's 'shareholder standard adjustments' that "the adjustment of the major shareholder criteria and the tax reform plan has clearly thrown cold water on the KOSPI 5000 euphoria rally," and added, "Yesterday, a new party leader and new senior members were elected. I will ensure that the leadership collects public sentiment well and resolves the issue wisely."
Earlier, the Ministry of Economy and Finance announced in its tax reform plan unveiled on the 31st of last month that it would lower the threshold for taxing capital gains from major shareholders from owning over 5 billion won per stock to over 1 billion won.
In response, criticism led by individual investors is growing stronger. A post titled 'Opposition to Lowering Capital Gains Tax for Major Shareholders' has been posted on the National Assembly's public petition board, gathering over 90,000 signatures.
In turn, Kim Byeong-ki, the floor leader of the Democratic Party, noted on the 1st that he would examine whether to strengthen the criteria for major shareholders through the in-party KOSPI 5000 Special Committee and the Tax Normalization Special Committee, indicating that the party leadership has also expressed intent to reconsider relaxing the major shareholder requirements.
The 'Tax Normalization Special Committee' has not yet been activated. Now that a new party leader has been elected, it is expected that the committee will commence official activities after internal discussions.
A Democratic Party member who joined the Tax Normalization Special Committee said in a telephone conversation, "When the leadership is newly formed, all organizations must receive new approval. It is challenging to say whether or not to conduct the committee's activities without the new leadership's approval. The new leadership needs to determine the policy."
Within the party, debates surrounding the 'major shareholder requirements' have been spreading since the government plan was announced. So far, public concerns about the government's tax reform plan have been expressed by 11 ruling party members, including Syun Lee Un-joo and Lee So-young. They believe it is necessary to consider the 'major shareholder requirements' in line with the government's focus on revitalizing the stock market.
On the other hand, Jin Seong-jun, the chairperson of the policy committee who oversees party policy, takes the stance that lowering the standards for major shareholders will not significantly impact the stock market. He stated on the 2nd, "During the Park Geun-hye administration, the threshold was lowered from 10 billion won to 5 billion won, then again to 2.5 billion won, and during the Moon Jae-in administration, it was reduced from 2.5 billion won to 1.5 billion won, and again to 1 billion won, but there was hardly any fluctuation in stock prices at that time," publicly refuting, "The Yoon Suk-yeol administration has rolled back the requirement drastically from 1 billion won to 5 billion won, yet conversely, stock prices have been falling."
The opposition party criticizes the discrepancy between the positions of Floor Leader Kim and Chairperson Jin, saying, "The Democratic Party is in disarray (Park Seong-hoon, senior spokesperson of the People Power Party)."
There are calls for the ruling party to expedite its deliberation process to minimize market confusion. Democratic Party member Lee Yeon-hee stated that day, "The government's plans to strengthen major shareholder requirements and the reorganization of separate taxation on dividends are provoking sensitive reactions in the market," and suggested that the stock market tax reform plan needs to be discussed in alignment with the national economic vision of KOSPI 5000.