Voices within the ruling party are growing that the tax reform plan should be re-evaluated. Jung Cheong-rae, the new leader of the Democratic Party of Korea, has issued a 'gag order,' but lawmakers are sharing their views on the need for internal public discussion through personal Facebook posts.
Lee So-young, a member of the Democratic Party of Korea, stated on Facebook on the morning of the 4th, "Rep. Jeon Yong-ki also expressed that the expanded scope of major shareholders and the retracted separate taxation plan for dividends should be reconsidered," adding, "So far, 13 ruling party lawmakers have expressed public concerns about the tax reform plan."
The lawmaker noted, "It is very unusual for opposing and concerned voices to arise within the ruling party regarding a policy announced by the government," and encouraged a humble re-examination of whether there were aspects that the party and government had not considered, adding that if there were deficiencies, it would be a desirable way to communicate with the public to decisively withdraw the stance.
On July 31, the Ministry of Economy and Finance announced a tax reform plan that includes raising the securities transaction tax rate, introducing a separate taxation on dividends at the highest rate of 35%, and strengthening the criteria for major shareholders subject to stock transfer income tax. The plan has been criticized as disadvantageous for investors in the stock market, raising concerns that it contradicts the initial promises of the Lee Jae-myung administration, which called for boosting the stock market and achieving the KOSPI 5000 era.
The lawmaker subsequently posted an article titled 'Position on the Ministry of Economy and Finance's Tax Reform Plan,' clearly opposing the separate taxation of dividends and the strengthening of stock transfer income tax criteria for major shareholders. She expressed doubt about whether 1 billion won could qualify someone as a major shareholder, questioning the tangible benefits (tax revenue effect) that could be gained compared to the clarity of confusion in the market, stating, "Based on these issues, I will attempt to persuade several lawmakers."
From the weekend until this morning, 13 members of the Democratic Party, including this lawmaker (Lee Eon-joo, Lee Hun-ki, Park Sun-won, Kim Han-kyu, Kang Deuk-gu, Kim Hyun-jeong, Park Hong-bae, Lee Yeon-hee, Park Hae-cheol, Jung Il-young, Kim Sang-wook, Jeon Yong-ki), have publicly expressed their positions for a review of the tax reform related to revitalizing the capital market. It is somewhat like a Facebook petition.
As the controversy spread, Jung Cheong-rae, the new party leader, stated at a Supreme Council meeting that "there is a heated debate regarding stock transfer income tax, and it is inappropriate to publicly discuss this within the party in such a manner," and issued a gag order. He also instructed Lim Jong-ae, the new policy chief, to draft and report plans A and B by today.
The tax reform plan announced by the government has also gone through coordination with the ruling party and the presidential office. Nonetheless, the voices for 're-evaluating' it within the ruling party have emerged because the stock market is volatile and individual investors are targeting the ruling party.
On the 1st, the KOSPI index closed at 3119.41, down 126.03 points (3.88%) from the previous day. The same went for the KOSDAQ index. The upward momentum of the stock market, which was showing a trend toward the 'KOSPI 5000 era' since the launch of the Lee Jae-myung administration, was abruptly reversed.
The petition titled 'Opposition to lowering the stock transfer income tax for major shareholders' posted on the National Assembly's electronic petition system on July 31 has surpassed 120,000 signatures as of noon on the 4th. This is the only petition among the posts that has exceeded 100,000 signatures. The author pointed out, "The stock transfer income tax is a law that major shareholders can easily evade by selling at the end of the year, and if we continue to allow this, with Nvidia and the Director General of the Korean stock market paying the same taxes, who would manage the Korean stock market? If there is a flood of evasion on a yearly basis, the KOSPI cannot rise like in the U.S."