As the KOSPI index topped 4,000 for the first time ever, the ruling Democratic Party of Korea was in a celebratory mood throughout the 27th. Floor leader Kim Byung-kee of the Democratic Party said, "144 trillion won in market cap evaporated due to the Dec. 3 martial law insurrection. Back then, there were many pessimistic views that even KOSPI 3,000 would be difficult," adding, "now our market is overturning those expectations and writing a new history."
At the same time, however, there is a sense that the Democratic Party's Achilles' heel, the "financial investment income tax," is resurfacing. Former Justice Party lawmaker Jang Hye-young shared Democratic Party lawmaker Lee So-young's Facebook post that said, "The KOSPI broke through 4,000 intraday. We will stay calm and work harder," and said, "now that the KOSPI is at 4,000, it's time to re-push the financial investment income tax."
Jang also posted an interview Lee So-young did with a media outlet in Aug. last year. In that interview, Lee argued that the introduction of the financial investment income tax should be postponed, saying, "The tax is like charging a toll without even paving the road."
She went on, "If I were a stock investor, at the very least, the domestic stock market would need to fully settle above the 3,000 level after escaping the 'Boxpi' it has been trapped in for 17 years and be heading toward 4,000 for me to think, 'as market opacity has improved, I can accept taxes.'" She thus presented a KOSPI index of 4,000 as the criterion for introducing the tax. When she gave the interview, the KOSPI index had not even passed the mid-2,000s. KOSPI 4,000 seemed a tough peak for the time being, but it was reached in just about a year.
The financial investment income tax is the Democratic Party's Achilles' heel. The party has long upheld the progressive value that "where there is income, there is taxation." But on Nov. 4 last year, then Democratic Party leader President Lee Jae-myung decided to abolish the tax, overturning the long-held party line. Democratic Party lawmaker Jin Sung-joon and others kept voicing opposition, but as criticism from stock investors intensified, President Lee made the call.
The justification put forward by Democratic Party lawmakers who argued for postponing or abolishing the tax at the time was "financial market stability." Lawmakers such as Lee So-young and Lee Un-ju were representative. At a supreme council meeting in Sept. last year, Lee Un-ju said, "It is not too late to implement it after advancing the South Korean stock market," and argued, "the current stock market has been in a '2,000-level Boxpi' situation for 17 years. We must also consider that due to the 'Korea discount,' the value of domestically listed companies is undervalued."
About a year later, the KOSPI index has surpassed 4,000 and the stock market is booming, but no lawmakers in the Democratic Party are mentioning the tax. ChosunBiz asked Lee So-young and Policy Committee Chair Han Jeong-ae about introducing the tax on this day, but received no answer.
A Democratic Party lawmaker on the National Assembly Strategy and Finance Committee who could be reached showed reluctance when asked about introducing the "financial investment income tax." The lawmaker said, "We've just hit 4,000 once. It needs to settle in stably, and there needs to be a solidification of public perception that from now on, people should entrust their assets to the stock market rather than real estate to keep growing them," adding, "reporters are too fast."
The lawmaker said, "If the stock market were overheating to the point that we needed to put out the fire, maybe we could try (the tax) as a calming card, but not now," and asked back, "would investors sit still when their money is taken right away?"
In political circles, it is seen as difficult for the Democratic Party to bring up a sensitive tax issue while support in the Seoul metropolitan area and among swing voters is already freezing after the Oct. 15 real estate policy announcement. It is in the same vein that the party leadership hurried to contain the situation right after the ruling and opposition parties showed divergence over strengthening property holding taxes.
An aide to a Democratic Party lawmaker said, "Sensitive tax measures like the property holding tax or the financial investment income tax will be hard to discuss officially until the local elections."
Regarding this, former lawmaker Jang said, "I have long told those who said the stock market is in a slump so the tax cannot be introduced. If it's a boom, you'll say you can't do it because it's a boom, right? If the unemployment rate is high, will you abolish the earned income tax?" She added, "the stock market situation and the introduction of the tax were never subjects to be linked in the first place. It is merely wordplay to hide the intention to grant a privileged status to financial investment income."