The government has set a policy to prioritize giving up to 30% (200 billion won) of subscriptions to the "Public Participation Public Growth Fund" to investors whose income is below a certain level, according to reports on the 24th. The Public Growth Fund is a fund that invests in advanced strategic industries that will be future growth drivers, and it guarantees principal even with losses of up to 20%. Part of the investment is also eligible for income deductions, drawing attention in the market as a tax-saving product.
The Ministry of Economy and Finance and the Financial Services Commission are reviewing "annual salary of 50 million won and comprehensive income of 38 million won or less" as the criteria for priority subscription to the Public Growth Fund. This appears to be aligned with the individual savings account (ISA), a similar tax-saving product. ISAs are categorized by income level. While the tax-free limit for a standard ISA is 2 million won, it is 4 million won for the low-income type. The low-income ISA is available only to workers with annual salaries of 50 million won or less and business owners with comprehensive income of 38 million won or less. In effect, the government is considering matching the eligibility for priority subscription to the Public Growth Fund with the low-income ISA.
Initially, the government planned to allow subscriptions to the Public Growth Fund regardless of income. That drew criticism that the product concentrates benefits on high earners. When the Strategy and Finance Committee ran a simulation of the Public Growth Fund's income deduction effect, it found that if a person earning 50 million won and a person earning 100 million won each invested 5 million won, the person at 50 million won would save 300,000 won in taxes, while the person at 100 million won would save 480,000 won. The higher the income, the greater the tax benefit. Accordingly, the government's idea is to set aside a portion of the Public Growth Fund subscription amount for middle- and low-income earners.
The Public Growth Fund will begin sales as early as May. The total size of the fund is 600 billion won. Subscribers can receive various benefits. Up to 18 million won is deductible from income, and the tax rate on dividends is 9.9%, not 15.4% as with general funds. In addition, dividend income generated here is fully taxed separately without being combined with other income, and is excluded from comprehensive taxation.