Lee So-young of the Democratic Party of Korea said on the 3rd that the government's plan for the stock price suppression prevention law included in the tax reform plan released by the government "could be misunderstood as a retreat in the will to reform."
In a post on her Facebook page this afternoon, Lee wrote, "The government plan released today by the Ministry of Finance and Economy goes in a direction that renders the very idea of the stock price suppression prevention law meaningless."
In May last year, Lee, as the lead sponsor, introduced a partial amendment to the Inheritance Tax and Gift Tax Act to calculate inheritance tax for listed companies' securities at 80% of their actual value (net asset value) like unlisted companies if they fall short of 80% of actual value. In other words, if the price-to-book ratio (PBR) is below 0.8 times, it is deemed that stock price suppression has occurred.
Under the plan the Ministry of Finance and Economy disclosed that day, stock price suppression would be deemed to have occurred for low-PBR corporations that fall in the bottom 25% by sector on the KOSPI or the bottom 10% on the KOSDAQ over the past six years, or if over the past year there were acts that negatively affected corporate value, or if the assessed value fell more than 30% below market price over the past three years.
The ministry presumes stock price suppression if either of the two conditions is met. However, the taxpayer may object that the stock was not deliberately pushed down; in that case, the National Tax Service's Appraisal Deliberation Committee makes the final determination on whether stock price suppression occurred.
For corporations determined to have engaged in stock price suppression, the evaluation period is extended to reappraise listed shares. Inheritance and gift tax are imposed on the larger of the highest closing-price valuation over the past 6 months to 6 years and 6 months, or 1.3 times the market price under the current valuation method.
Regarding this, Lee said, "As the original designer of this bill, it is hard for me to hide my dismay," adding, "The stock price suppression prevention law I introduced has been expected to improve the structure of our capital market, and the president has also expressed agreement on multiple occasions."
She went on, "The Lee Jae-myung administration is the administration that began capital market reform that no one had undertaken until now, through three amendments to the Commercial Act," and added, "I will separately detail the problems in the government plan, and since deliberations on the tax law amendment will proceed through the end of Nov., we will correct as many problems as possible by then."