Disagreements between the ruling party and the government regarding the capital gains tax criteria for major shareholders have continued for a month, increasing market uncertainty. Within the ruling party, there are voices saying that "more active communication is needed."
According to political circles on the 21st, the ruling party and the government have not been able to reach a consensus despite nearly a month of discussions following the announcement of the tax reform bill this year. They have not come to a conclusion on whether to strengthen the criteria for major shareholders to "10 billion won or more per stock" or to maintain the current threshold of "5 billion won." While the government and the president's office emphasize fairness in taxation and stick to the existing reform plan, the Democratic Party insists on maintaining the current standard.
Related discussions reportedly did not take place during a dinner held the previous day with President Lee Jae-myung and the ruling party leadership. Han Jeong-ae, chair of the policy committee, met with reporters that day and said, "The government is saying to watch the market a bit more, and the president's office is also suggesting to observe a bit longer because the government is doing so." Regarding some reports that the president's office notified the party of the "10 billion won standard retention," both the president's office and the Democratic Party said it was "not true" and attempted to clarify.
The government's insistence on the existing plan is based on the principles of "normalization of tax cuts" and "fairness in taxation." At the same time, the need to secure resources for stabilizing people's livelihoods and stimulating the economy seems to have been taken into account. Koo Yun-cheol, Vice Prime Minister and Minister of Economy and Finance, explained at a full meeting of the Strategy and Finance Committee on the 19th that "the government believes the principle of this tax reform is fairness in taxation and efficiency." The Ministry of Economy and Finance estimates that if the criteria for major shareholders are lowered to 10 billion won, an additional revenue of about 200 billion won will be generated annually.
The problem is that while the conclusion is delayed, market uncertainty is expanding. Jeong Il-young, a Democratic Party lawmaker, criticized the Ministry of Economy and Finance during the Strategy and Finance Committee meeting on the 19th, stating, "The controversy over the criteria for major shareholders is causing significant market confusion. When will a conclusion be reached?" However, since the capital gains tax criteria for major shareholders are a matter of enforcement rules rather than a legislative amendment, it seems difficult for the ruling party to push strongly.
The final decision is likely to be made at the high-level party-government meeting next month, but it cannot be ruled out that it may be postponed until the end of the year. Accordingly, there are increasing calls for the ruling party and the government to strengthen communication to minimize market confusion.
A lawmaker from the Democratic Party's 'KOSPI 5000 Special Committee' remarked during a conversation, "The recent decline in the KOSPI cannot solely be attributed to the criteria for major shareholders, as it is tied to various factors such as U.S. tariff negotiations and corporate earnings." However, he added that "if it conflicts with the government's trend of revitalizing the capital market, the ruling party and government need to communicate more closely. I have been continuously advising the leadership. The persuasion efforts will continue."