Taxpayers' Federation: "50 Million KRW Increase in Basic Deduction for Stock Transfer Tax Is an Excessive Benefit"

Abolish Basic Deduction for Transfer Tax on Listed Stocks and Lower Current 20% Tax Rate

[Asia Economy Reporter Kwangho Lee] The initial government proposal to raise the basic deduction amount for capital gains on stocks to 50 million won has been criticized as an excessive benefit compared to earned income, business income, and even capital income such as interest and dividend income.

There was also an argument that the idea of stabilizing housing prices by increasing real estate taxes lacks both theoretical and empirical evidence. According to statistics from the Organisation for Economic Co-operation and Development (OECD), Korea's real estate-related taxes are high while the proportion of income tax is low.

The Korea Taxpayers Federation commented on the government's announced '2020 Tax Reform Plan' on the 22nd, stating, "To stabilize housing prices and advance the tax system, the proportion of income tax should be increased and real estate-related tax revenue should be reduced, but this year's tax reform plan goes in the opposite direction."

The Taxpayers Federation criticized the government's June proposal to raise the basic deduction for capital gains on stocks, combining domestic listed stocks and public stock-type funds, from 20 million won to 50 million won, saying, "Based on the principle of a broad tax base and low tax rates, it is desirable to abolish the basic deduction and either lower the current 20% tax rate or maintain the original basic deduction of 20 million won."

The Federation suggested, "The carryforward period for losses should be unlimited, as in the United States, the United Kingdom, Germany, and Sweden. If 30% of stock capital losses are credited against comprehensive income tax in the current year, and securities transaction tax is lowered by the amount of capital gains tax revenue, the risk for general individual investors would decrease compared to the current situation, which is desirable."

Regarding the policy to raise the comprehensive real estate tax and capital gains tax, they said, "Frequent tax law revisions have made the tax code incomprehensible even to experts. This is an issue that requires sufficient time for research and discussion, so it should be excluded from this year's tax reform plan to preserve legal stability and predictability."

The Federation explained, "Holding taxes on rental housing can be passed on to tenants, so an increase in the comprehensive real estate tax could inadvertently drive up housing prices. The intensification of capital gains tax can cause a freezing effect, reducing supply, and excessively high tax rates may impose capital gains tax on fictitious gains, which could raise constitutional concerns."

Regarding the introduction of a new tax bracket for taxable income exceeding 1 billion won and raising the top income tax rate for this bracket to 45%, they pointed out, "Currently, the exemption rate for income tax is high at 39%, and the top 0.1% pay 12.8%, the top 1% pay 32.6%, and the top 10% pay 74.4% of earned income tax revenue, indicating that high-income earners bear a large share of the tax burden. If tax increases are necessary for welfare and national debt reduction, universal taxation should be applied."

Additionally, regarding the temporary increase of the credit card income deduction limit by 300,000 won this year, they evaluated it as "inappropriate since 410 billion won has already been supported through the increase in income deductions."

Kim Seontaek, Chairman of the Korea Taxpayers Federation, emphasized, "For welfare expansion and universal welfare, taxes should not be collected only from the wealthy; all citizens must pay their fair share of taxes. To reflect this in policy, trust in the government, public officials, and the tax system must be prioritized."

This content was produced with the assistance of AI translation services.