At a meeting held to evaluate the tax reform proposal hosted by the ruling Democratic Party of Korea, experts expressed sharp criticisms. There were criticisms that the disagreements within the ruling party regarding the expansion of the major shareholder criteria for the capital gains tax on stocks exacerbated a needless controversy. Additionally, there was criticism that the introduction of separate taxation for dividends undermined tax principles.
On the 7th, the Democratic Party of Korea held an emergency forum titled '2025 Tax Reform Proposal' at the National Assembly's member office building. The forum was co-hosted by Democratic Party lawmakers Oh Ki-hyung, Kim Young-hwan, and Choi Gi-sang, along with Cha Gyu-geun from the Rebuilding Korea Party, the People's Solidarity for Participatory Democracy, and the Participation Center. With political debates intensifying over the first tax reform proposal announced by the Lee Jae-myung administration on the 31st of last month, civil society and experts gathered to analyze key issues and seek the future direction of tax reform.
◇"Return to the previous state from the regression of the Yoon government... Damaged tax fairness, funding plans have limitations"
Experts attending the meeting evaluated the issues of restoring the major shareholder criteria for the capital gains tax, raising the nominal corporate tax rate, and allowing separate taxation of dividends, saying, 'The direction is correct but it only achieved half of the reform.'
Professor Kim Hyun-dong from Paichai University, who served as a panelist, noted, 'I positively evaluate the aspect of restoring some of the regressive amendments made by the previous administration,' but pointed out the limitations, saying, 'There is no way to confirm the necessary funding related to the fulfillment of promises made by President Lee Jae-myung during the presidential candidate period and the issue of damaged tax fairness.'
Regarding the government's proposal to raise the highest corporate tax rate to 25% by uniformly increasing the tax rate by 1 percentage point for each standard of taxation, researcher Lee Sang-min positively evaluated this, stating, 'The tax revenue is expected to decrease by about 80 trillion won over the next five years due to the tax cut by the Yoon Suk-yeol government, but this tax reform is expected to restore about 35 trillion won.'
However, experts pointed out that 'raising just the nominal tax rate has limited effect on increasing tax revenue.' Professor Yoo Ho-rim analyzed that 'the effective tax rate significantly decreased during the Yoon Suk-yeol government,' stating that merely raising the nominal tax rate is unlikely to result in a significant increase in taxes. The effective tax rate for large corporations was 21.8% in 2021, but it fell to 18.7% in 2023, during the Yoon Suk-yeol administration. This means that the Democratic Party must find ways to increase the effective tax rate, considering deductions or exemptions, for the intended increase in taxes to materialize.
The part where experts expressed sharp criticism was the introduction of separate taxation for dividends. The government decided to allow separate taxation at a rate of 14-35% instead of levying the basic income tax rate of 6-45% on dividends received from high-dividend corporations that meet certain criteria.
In this regard, researcher Lee Sang-min claimed, 'The basic principle of income tax in our country is the principle of comprehensive taxation; however, separate taxation of dividends has undermined this principle.' He particularly pointed out that 'applying step-by-step separate taxation based solely on the dividends received from high-dividend corporations will degrade the current income tax system and violate the principle of fairness that individuals with higher incomes should be subject to higher tax rates.'
Experts unanimously expressed that the increase in the securities transaction tax rate from the existing 0.15% to 0.2% was 'inevitable after the abolition of the capital gains tax.' However, they also highlighted the need for the introduction of a minimum tax per taxable income bracket, reevaluation of the capital gains tax, and the establishment of mechanisms to ensure the effective tax rate as future tasks for structural reform.
They also pointed out the expression of disagreements within the ruling party surrounding the tax reform proposal. Professor Kim stated, 'The unaddressed voices within the ruling party are causing needless controversies before and after the announcement of the tax reform proposal, which is very concerning. It is not a desirable image for a governing party,' emphasizing that 'sufficient discussions within the party are necessary to prepare a single proposal to avoid confusion.'
◇Ruling party, cautious discussion on 'tax reform proposal' while organizing internal positions
It was expected that various opinions would be expressed by ruling party lawmakers at the meeting, but all the lawmakers who co-hosted the event were absent. A staff member from one lawmaker's office said, 'We just set the venue for the meeting at first,' but interpretations suggest that they were conscious of the 'instructions to refrain from public remarks on the tax reform proposal' from Representative Jeong Cheong-rae.
Lawmaker Oh Ki-hyung stated in his opening remarks, 'The government's tax reform proposal is not finalized as it is,' adding, 'Any issues that require legal amendments must go through discussions in the National Assembly.'
The Democratic Party of Korea is expected to soon compile and organize its position on the recently contentious 'major shareholder criteria for the capital gains tax' and other tax reform proposals. Democratic Party spokesperson Kim Hyun-jeong mentioned, 'The current official position regarding capital gains tax related to stocks will be collected from internal lawmakers by the party's policy committee and communicated to the party leader, and it will naturally be conveyed to the presidential office during the high-level party-government council scheduled for this Sunday.'
◇People Power Party: 'Government tax reform proposal is a tax plundering three laws... We will present alternatives'
They unanimously criticized the tax reform proposal by the administration of Lee Jae-myung as 'anti-market and anti-corporate tax plundering three laws.'
Floor Leader Song expressed in his opening remarks, 'The government has proclaimed that it would take care of people's livelihoods and usher in the era of KOSPI 5000, but in reality, looking at the policy content, it seems that the dream of KOSPI 5000 has already drifted away.'
Policy Committee Chairperson Kim Jeong-jae pointed out the internal disagreements within the ruling party, saying, 'It seems that they are aware that they are going wrong, given that Representative Jeong Cheong-rae has given orders to keep quiet about the tax reform proposal.' He also criticized the proposal for only presenting short-term remedies focused on tax increases while ignoring structural reform topics such as inheritance tax and gift tax revisions. He stated, 'All the improvement measures that the business community had requested, such as the modernization of the inheritance tax and gift tax system, and the introduction of estate acquisition tax, were excluded.'
Chairperson Im I-ja criticized, 'They are already tying corporations up with the Yellow Envelope Law, binding them with the amendment to the Commercial Act, and now they intend to twist their necks with the "tax plundering three laws (increases in corporate tax, capital gains tax, and transaction tax).'" The People Power Party plans to propose a tax reform alternative that reflects the realities of markets and corporations following this discussion.
김정재 정책위의장은 "정청래 대표가 (세제 개편안에 대해) 입 꼭 다물어 라고 엄명을 내린 걸 보면 본인들도 잘못되고 있다는 걸 알고는 있는 것 같다"면서 여당 내 이견 표출을 지적했다. 또 이번 개편안이 상속세·증여세 개편 등 구조 개혁 과제는 외면한 채, 증세 중심의 단기 처방만 제시했다는 점도 비판했다. 그는 "경제계에서 많이 요청했던 상속세·증여세 체계 현대화나 유산취득세 도입 등 개선 방안이 모두 빠졌다"고 했다.
임이자 기재위원장은 "이미 노란봉투법으로 기업 발목잡고, 상법 개정안으로 기업 팔을 묶어 놓고 이제는 '조세수탈 3법(법인세·양도세·거래세 인상)'으로 목까지 비틀겠다는 것"이라고 비판했다. 국민의힘은 이날 토론회를 계기로 시장과 기업 현실을 반영한 세제개편안 대안을 정부에 제안하겠다는 계획이다.