"Government Policy Consistency Needed" Conflict Between Party and Government Over '300 Million Major Shareholder Requirement'

Deputy Prime Minister Hong: "Government Policy Must Be Consistent"
"Stock Market Turmoil", "Will Cause Rejection" Concerns from Ruling Party Lawmakers
Petition for Deputy PM Hong's Dismissal Surpasses 80,000 Supporters

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance (center), is responding to questions from committee members during the National Assembly's Planning and Finance Committee's audit of the Ministry of Economy and Finance held on the afternoon of the 7th at the Government Complex Sejong in Sejong City. / Photo by Yonhap News

[Asia Economy Reporter Lim Juhyung] The ruling party and the government are deepening their conflict over the plan to lower the threshold for major shareholders required to pay capital gains tax on stocks from 1 billion KRW to 300 million KRW per stock. The Ministry of Economy and Finance insists on adhering to the principle of "taxation where income exists," but the ruling party expresses concerns that the individual investor stock market could be adversely affected. Previously, tens of thousands of so-called "Donghak Ant" investors protested against the strengthening of the major shareholder criteria and even called for the dismissal of Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki.

On the 7th, at the National Assembly audit of the Ministry of Economy and Finance held at the Government Complex Sejong, Deputy Prime Minister Hong announced that the plan to strengthen the major shareholder criteria for imposing capital gains tax from the current 1 billion KRW to 300 million KRW would be implemented starting April next year. Hong emphasized, "Government policies must be consistent," and added, "This matter is not intended for tax increase purposes at all, but rather for tax fairness."

However, he added that they are considering abolishing the family aggregation rule for calculating stock holdings and instead limiting it to the individual holder.

Goh Yong-jin, Member of the Democratic Party of Korea / Photo by Yonhap News

On the other hand, the Democratic Party expressed concerns about the plan to expand the scope of capital gains tax on stocks.

During the audit, Democratic Party lawmaker Ko Yong-jin said, "There are concerns about market turmoil," and argued, "Considering that taxation on stock capital gains will begin in 2023, the expansion of major shareholder criteria should be postponed."

On the same day, Democratic Party lawmaker Woo Won-sik wrote on his Facebook, "Imposing capital gains tax on stock holdings over 300 million KRW is premature," and pointed out, "Even the designation of major shareholder status to family members holding over 300 million KRW causes public resistance."

Woo said, "Usually, a major shareholder brings to mind a chaebol head or owner who holds enough shares to control an individual company, so it is natural to feel incredulous that the same standard is being applied to unrelated individuals," adding, "At a time when the Korean stock market, often manipulated by institutions and foreign investors and undervalued relative to economic power, has risen as an active player under the name of Donghak Ants, it is inevitable to have doubts about strengthening capital gains tax criteria for them."

Meanwhile, the strengthening of major shareholder criteria has faced strong opposition from individual investors. Some investors have demanded the dismissal of Deputy Prime Minister Hong.

On the 5th, a post titled "Strongly Requesting the Dismissal of Minister of Economy and Finance Hong Nam-ki" was uploaded on the Blue House National Petition board. The petitioner argued, "The 300 million KRW major shareholder threshold will kill ant investors twice based on unequal taxation," and claimed, "Despite the president's request not to dampen enthusiasm for stock participation, the Minister of Economy and Finance insists on unreasonable regulations."

They continued, "If the 300 million KRW major shareholder threshold is implemented, massive selling by ants will only fill the pockets of institutions and foreigners," and explained, "Stock funds will flow into the real estate market, negatively impacting real estate policies." This implies that if the major shareholder criteria for taxpayers expand, increased sell-offs to avoid taxes could cause stock prices to plummet, harming individual investors.

They emphasized, "I hope the Minister of Economy and Finance, who acts against government policy, will be dismissed and a new minister who implements proper policies for the genuine ant investors will be appointed." As of 7:30 a.m. on the 8th, the petition had received over 80,000 endorsements.

Previously, the government decided to gradually expand the major shareholder criteria and strengthen capital gains tax standards according to the '2017 Tax Law Amendment.' Accordingly, from April next year, shareholders holding more than 300 million KRW per stock will have to pay capital gains tax on their gains.

Under current law, shareholders holding 1 billion KRW or more per stock are defined as major shareholders and are subject to capital gains tax of 22-33% (including local tax) on their gains.

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