Ministry of Economy and Finance Pushing for "Major Shareholder 300 Million"

Position Unchanged on Lowering the 1 Billion Standard... Political Circles and Individual Investors Continue to Oppose

[Image source=Yonhap News]

[Asia Economy Reporter Jang Sehee] The government has decided not to change the 300 million KRW threshold for major shareholders despite opposition from individual investors known as Donghak Ants and political circles.

According to the government on the 20th, the Ministry of Economy and Finance plans to proceed with the enforcement decree of the Income Tax Act, which designates individuals holding combined family stocks worth 300 million KRW or more as major shareholders subject to taxation, as originally scheduled despite recent controversies. A government official stated, "Since April 2021, the current standard for major shareholders subject to capital gains tax has been lowered from 1 billion KRW per stock to 300 million KRW," adding, "Only individual taxation will be adjusted." Earlier, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, said at the National Assembly's Planning and Finance Committee audit on the 11th, "The government changed the law two years ago and announced the 300 million KRW threshold in the enforcement decree, so reversing this would be difficult considering policy consistency and fairness in asset income taxation."

Some speculated that the government might change the originally set enforcement decree under pressure from public opinion and political circles, but the stance of Deputy Prime Minister Hong and the Ministry of Economy and Finance remains unchanged.

On the 19th, a project led by the Korea Stock Investment Federation aimed to make the "Dismiss Hong Nam-ki" petition rank first on Naver's real-time search, reflecting strong opposition from individual investors regarding the 300 million KRW major shareholder threshold. A Blue House petition titled "We strongly request the dismissal of Minister Hong Nam-ki of the Ministry of Economy and Finance" has also been posted. As of 11 a.m. that day, the petition had garnered 128,000 signatures.

In the political arena, both ruling and opposition parties oppose strengthening the major shareholder criteria. Kim Tae-nyeon, floor leader of the Democratic Party of Korea, said, "Capital gains tax will be collected from all stock investors in 2023," and pressured the government to postpone strengthening the major shareholder criteria, stating, "Many believe it is more efficient to focus on reorganizing the new tax system in two years." The opposition also plans to continue discussions at the National Assembly level with bills submitted by lawmakers Chu Kyung-ho and Ryu Seong-gil of the People Power Party.

Despite opposition from political circles and individual investors, the government has expressed that it cannot change its position considering policy consistency and fairness in asset and investment income taxation. The government decided to expand the scope of taxation by strengthening the major shareholder criteria, judging that it is difficult to reverse this without clear logic.

According to the enforcement decree of the Income Tax Act, from next year, the stock holding amount standard for determining major shareholders subject to capital gains tax will be lowered from 1 billion KRW to 300 million KRW. If stocks of the relevant item are sold for a profit after April next year, a capital gains tax of 22-33% (including local tax) must be paid.

The Ministry of Economy and Finance plans to expand the scope of taxation by comprehensively considering the stock value per item and the proportion of taxpayers. According to the ministry, only about 1.5% of stock investors, approximately 90,000 people, hold stocks worth 300 million KRW or more per item.

The strengthening of the major shareholder criteria was decided three years ago more for tax fairness than for tax increase purposes. Since taxation is already applied to assets such as real estate and commercial properties as well as earned income, there is no reason not to collect taxes on stock investments.

However, some criticize that grouping investors holding 300 million KRW per stock as major shareholders is outdated. Even within the Ministry of Economy and Finance, there is a shared recognition that it is more appropriate to consider them as non-small shareholders rather than using the term major shareholders. Therefore, there is a possibility of changing the bill's title in the future.

A government official said, "Currently, how to set the scope of taxation is important," but added, "Changing the term 'major shareholder' specified in the bill is a very minor issue, but if necessary, it could be discussed within the regular National Assembly session." Since the deadline is until the end of the year, when the Income Tax Act takes effect, there is also speculation that changes may occur later.

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