Lee "Capital Gains Tax Abolition is a Tax Cut for the Rich, Abolish Transaction Tax" VS Yoon "If Funds Flow In, Even Small Investors Benefit"

Casting Vote: Competition for Protecting Ant Investors' Profits to Capture the 2030 Generation
"Capital Flight if Capital Gains Tax Maintained" "Transaction Tax Abolition is a Global Trend" Experts Divided

[Asia Economy Reporters Ki-min Lee and Seon-ae Lee] Presidential candidates are unveiling additional pledges to win the votes of individual investors. Not only the older generations but also the 2030 generation, who are the "casting vote" in this election, have shown heightened interest in capital market investments such as stocks due to the real estate market surge over the past five years, making them highly attentive to the candidates' pledges.

In particular, the two leading presidential candidates, Lee Jae-myung of the Democratic Party and Yoon Seok-youl of the People Power Party, have attracted attention by announcing opposing pledges regarding securities transaction tax and capital gains tax on stocks to protect so-called "ant investor" profits.

However, experts remain divided on the market impact of Yoon’s pledge to "maintain securities transaction tax and abolish capital gains tax on stocks" and Lee’s pledge to "apply preferential capital gains tax rates for long-term holders (maintain) and abolish securities transaction tax."

On the 21st, Lee posted on his social media, "The tears of ant investors never dry," promising to abolish the securities transaction tax to ease tax burdens. He explained, "This is not a capital gains tax cut for the wealthy, but the abolition of the securities transaction tax, which is equally imposed on both ants and the wealthy." He added, "We will prepare a plan to use financial income tax revenues to cover the rural special tax imposed on securities transaction amounts in the stock market to ensure no future shortfalls." Lee also expressed his intention to apply preferential capital gains tax rates to long-term stockholders.

He further stated, "We will enable pension funds to actively purchase stocks," pledging to raise the National Pension Service’s domestic stock investment ratio from the current 15-16% to around 25%, comparable to advanced countries. Additionally, he promised to increase the allocation ratio for general subscribers in initial public offerings (IPOs) of newly listed companies from the current 25% to over 30%.

Lee has emphasized in regional campaigns and pledge announcements the importance of strengthening penalties for illegal activities such as one-strike-out rules for stock price manipulation, banning discriminatory short selling of IPO stocks, and enhancing monitoring of illegal short selling to protect individual investors and achieve a KOSPI 5000 index. However, he appears to have added pledges such as tax reductions and IPO allocation increases that individual investors can tangibly feel in their daily lives.

Candidate Yoon also supports strengthening related legislation to protect individual investors and believes revisions to the short selling system are necessary. Yoon has pledged to establish a dedicated short selling surveillance organization and introduce a "short selling circuit breaker" system that temporarily halts stock trading when short selling causes stock price declines. Both candidates have promised to raise the non-taxable threshold for investment gains in virtual assets, which are actively traded by the 2030 generation, to 50 million KRW and aim to minimize investors’ losses.

However, the methods of easing tax burdens differ between the two candidates. Yoon is leading with a pledge to abolish the capital gains tax on stocks, scheduled for introduction next year, to activate stock trading. Initially, he had pledged to abolish the securities transaction tax in line with the introduction of the capital gains tax but recently revised his pledge to maintain the current level of securities transaction tax while abolishing the capital gains tax. Last month, Yoon emphasized on his social media, "Whether big or small investors, a lot of funds need to flow into and activate the stock market itself for general investors to earn profits," adding, "Now is the time to further activate the stock market."

Experts are also divided on the market impact of Yoon’s "abolition of capital gains tax" and Lee’s "application (maintenance) of preferential capital gains tax rates for long-term holders" pledges.

Supporters of abolishing the capital gains tax worry that maintaining it would increase tax burdens on super ant investors, causing capital outflows to overseas stock markets, which could hinder capital market growth and have adverse effects. Jung Eui-jung, CEO of the Korea Association of Individual Investors, said, "Individual investors earn less than 50 million KRW, so they might think imposing capital gains tax is not a problem, but the reality is different," adding, "The stock market is driven by big investors, and if they exit, the market could enter a long-term slump. Abolishing capital gains tax would free up trading and activate the capital market."

On the other hand, many experts worry that this trend diverges from global movements. Advanced stock markets like those in the U.S. and Japan view securities transaction taxes as encouraging capital flight and are abolishing them, while moving to strengthen capital gains taxes. Professor Jeon Sang-kyung of Hanyang University’s Department of Finance and Management said, "An ideal stock market is one with low volatility where small investors can safely invest long-term by focusing on corporate performance," adding, "For this, it is desirable to impose taxes where income is generated, i.e., to introduce capital gains tax."

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