Yoon Abolishes Capital Gains Tax on Stocks, Reversing Tax Law Amendment... Controversy Over Violation of Tax Principles

Financial Investment Taxation to Begin Next Year
Law Must Change to Abolish Capital Gains Tax
Hantuyon and Others Welcome Move
Many Obstacles Remain in Discussion Process

President-elect Yoon Suk-yeol is celebrating his victory on the 10th at the People Power Party's vote counting situation room set up at the National Assembly Library in Yeouido, Seoul. Photo by Yoon Dong-ju doso7@

[Asia Economy Reporter Kwon Jae-hee] With Yoon Seok-yeol of the People Power Party elected as the 20th president on the 10th, changes are expected in the capital market as well. As the era of 10 million individual investors dawns, various policies to protect them are likely to be established. One of the most notable is the abolition of the stock transfer tax, which is expected to spark controversy as it requires legislative amendment.

One of Yoon's key capital market pledges is the abolition of the stock transfer tax. The stock transfer tax is a tax levied on profits earned from selling stocks.

Currently, stock transfer tax applies to major shareholders classified as those holding a total amount of stocks worth 1 billion KRW or more per item, or holding a stake of 1% in KOSPI stocks (2% in KOSDAQ stocks). The current stock transfer tax is imposed on major shareholders at rates between 20% and 30%.

The government has announced through tax law amendments that from 2023, financial investment income taxation will be fully implemented for all investors. According to the revised tax law, from next year, if an investor earns more than 50 million KRW annually from stocks, bonds, funds, etc., a capital gains tax of 20% will be imposed on taxable income up to 300 million KRW, and 25% on amounts exceeding 300 million KRW. The principle is to tax where income exists. The securities transaction tax will be lowered from the existing 0.25% to 0.15%, a reduction of 0.1 percentage points.

Yoon's pledge is to completely overturn this.

During his candidacy, Yoon stated, "Stock trading should be activated with funds flowing not only from big players but also from small investors and general investors alike, so that ordinary investors can also earn profits," explaining the purpose of his pledge.

Individual investor groups such as the Korea Stock Investors Association (Hantuyon) have expressed their support. The securities industry also views this as beneficial for revitalizing the stock market.

However, since abolishing the stock transfer tax requires legislative amendment, there are skeptical views about whether it will actually be abolished. Issues such as the violation of the tax principle that "taxation occurs where income exists" and controversies over tax cuts favoring the wealthy are hurdles to be overcome during the discussion process. Additionally, in advanced countries such as the United States, Germany, and Japan, the trend is moving from securities transaction tax to capital gains tax, leading to criticism that this proposal does not align with the times.

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