[Economic Outlook] Hong Nam-gi's Focus... Attention on Comments about Jeonse Prices and Capital Gains Tax on Stocks

Hong Nam-ki, Deputy Prime Minister for Economy and Minister of Strategy and Finance [Image source=Yonhap News]

[Asia Economy Reporter Kim Eun-byeol] This week, the National Assembly's Planning and Finance Committee will hold a comprehensive audit of state affairs. Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is scheduled to attend the audit and present the government's stance on the overall economy. Attention is focused on Deputy Prime Minister Hong's remarks during the audit regarding government economic policies such as the housing lease crisis and the strengthening of capital gains tax on stocks.

Focus on Deputy Prime Minister Hong's Remarks on the Three Lease Laws and Capital Gains Tax on Stocks

The National Assembly's Planning and Finance Committee will conduct a comprehensive audit of the Ministry of Economy and Finance on the 22nd and 23rd at the National Assembly, with Deputy Prime Minister Hong, First Vice Minister Kim Yong-beom, and Second Vice Minister Ahn Il-hwan in attendance. It is expected that follow-up discussions on policies addressed during the audit on the 7th and 8th, as well as recent issues, will be conducted through Q&A sessions.

Real estate measures are expected to be the first topic on the agenda. Since the recent enforcement of the Housing Lease Protection Act (Lease Act) about two months ago, confusion in the rental, lease, and sales markets has intensified. This issue is triggered by tenants who, after initially deciding to move out at the end of their lease, reverse their decision and exercise their right to renew the lease contract.

Deputy Prime Minister Hong is also reportedly in a similar situation, making his remarks on this matter particularly noteworthy. Attention is also on what he will say about the rising trend in jeonse (long-term deposit lease) prices. Deputy Prime Minister Hong is currently in a position where his jeonse contract in Mapo-gu, Seoul, is expiring in January next year, and the landlord has expressed an intention to move in, forcing him to find a new jeonse.

Earlier, during the National Assembly's Land, Infrastructure and Transport Committee audit on the 16th, Minister of Land, Infrastructure and Transport Kim Hyun-mi responded to a question citing Deputy Prime Minister Hong's case by saying, "It would be better for the person in question to look for a new house first."

What Will Deputy Prime Minister Hong's Position Be on Strengthening Capital Gains Tax on Stocks?

This week's audit is also expected to revive controversy over the capital gains tax on stocks. According to the current Income Tax Act enforcement decree, the government plans to lower the stock holding threshold for determining 'major shareholders' subject to capital gains tax from 1 billion KRW to 300 million KRW starting next year. If a major shareholder sells the relevant stocks after April next year based on the year-end status of this year, they will have to pay a capital gains tax of 22-33% (including local tax).

The major shareholder criteria apply on a family aggregation basis. This includes the combined holdings of paternal and maternal grandparents, parents, children, grandchildren, and spouses.

During the audit on the 7th and 8th, both ruling and opposition parties agreed to postpone lowering the major shareholder threshold from 1 billion KRW to 300 million KRW. The People Power Party advocates postponing the threshold and changing the family aggregation to individual-based aggregation. Deputy Prime Minister Hong agreed with abolishing the family aggregation method and switching to individual taxation but expressed his intention to maintain the major shareholder threshold at 300 million KRW. It is therefore noteworthy whether Deputy Prime Minister Hong's position will change in the upcoming audit.

'Patterns of COVID-19 Employment Shock and Policy Recommendations' Report... Producer Price Index Announcement

On the 21st, the Korea Development Institute (KDI) will release a report titled 'Patterns of Employment Shock Caused by COVID-19 and Policy Recommendations.' Interest is focused on the report as the employment market is freezing again due to the recent resurgence of COVID-19. According to the employment trends in September, the number of employed persons last month was 27,012,000, a decrease of 392,000 compared to the same period last year. This is the largest decline in four months since May (392,000). The number of employed persons has been decreasing for seven consecutive months.

The employment rate for those aged 15 and over was 60.3%, down 1.2 percentage points from the same period last year. This is the lowest figure since September 2012 (60.2%) for the same month.

The employment rate for those aged 15-64, the OECD comparison standard, was 65.7%, down 1.4 percentage points from the same period last year. This is also the lowest since September 2014 (65.9%) for the same month.

The number of unemployed persons was 1 million, an increase of 116,000 from a year ago. This is the largest increase since May (133,000). The unemployment rate rose 0.5 percentage points from a year ago to 3.6%. This is the highest level in 20 years since 2000, excluding 2018, for the month of September. The economically inactive population was 16,817,000, an increase of 532,000 compared to the same period last year. Among the economically inactive, those classified as 'resting' numbered 2,413,000, the highest since the statistics revision in September 2013.

The Bank of Korea will release the 'September Producer Price Index' on the 21st. In August, the producer price index rose 0.5% from July to 103.19 (2015=100), maintaining an upward trend for three consecutive months since June. Due to unusual weather conditions such as typhoons and prolonged rainy seasons, prices of agricultural, forestry, and fishery products surged by 6.1% in one month. Attention is focused on whether the price increase led by agricultural products has eased in September.

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