The National Assembly's Finance Committee 'Financial Investment Tax' Debate... Ruling Party: "Twisting the Neck of Donghak Ants" Opposition: "Tax Revenue Decrease Due to Wealthy Tax Cuts"

與 "Should We Implement Financial Investment Tax When Investment Motivation Is Lost?"
Opposition "Lower Transaction Tax and Eventually Abolish It Is Key"

[Image source=Yonhap News]

Deputy Prime Minister for Economy Choo Kyung-ho attended the plenary meeting of the Planning and Finance Committee held at the National Assembly on the 17th and gave a proposal explanation on the supplementary budget bill. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Koo Chae-eun] On the 18th, the ruling and opposition parties clashed fiercely over the issue of 'postponing the introduction of the Financial Investment Income Tax Act (Financial Investment Tax)' at the plenary meeting of the National Assembly's Planning and Finance Committee. The opposition Democratic Party defined the postponement discussion as a 'tax cut for the rich,' while the ruling People Power Party argued that the implementation of the Financial Investment Tax should be postponed for two years considering the stock market downturn.

Democratic Party lawmaker Kim Tae-nyeon stated that Deputy Prime Minister for Economy and Finance Choo Kyung-ho, a current lawmaker, had proposed a bill in early 2020 to impose a transaction tax on capital income, saying, "A transaction tax requires paying taxes even if there is a loss, and since taxes are collected only where there is income, it aligns with tax justice, which was the basis for proposing the bill at that time."

In response, Deputy Prime Minister Choo corrected, "I proposed it in 2018, but due to various concerns, I did not pursue it after entering the 21st National Assembly," and added, "There are differing views on the timing of implementation."

Democratic Party lawmaker Yang Kyung-sook directed at Deputy Prime Minister Choo, "(The Financial Investment Tax) is supposed to be implemented together with the abolition of the securities transaction tax. Why does the government emphasize only the postponement of the Financial Investment Tax introduction and not that?" She accused, "Isn't the government secretly reluctant to abolish the securities transaction tax? They are giving tax cuts to the rich while worrying about a significant decrease in tax revenue if the securities transaction tax is abolished."

On the other hand, the People Power Party clearly opposed the Financial Investment Tax, arguing that its imposition could harm the financial market.

People Power Party lawmaker Kim Sang-hoon said, "During the Moon Jae-in administration, we experienced a terrible real estate hell and jeonse (lease) hell, and now we are going to experience a stock hell because of the Financial Investment Tax." He added, "Institutional investors, who will be excluded from the application, are absolutely advantaged, while 14 million domestic 'Donghak Ant' investors are being strangled. Is this the way to advance to a mature market?" He also pointed out, "If retail investors' stock and personal investments shrink, it will likely cause a crisis in corporate financing as well," and said, "This is not a matter of postponement but a matter that requires reconsideration of whether to impose the tax from the beginning."

Fellow party member Jo Hae-jin also mentioned, "Just as the previous government’s aggressive real estate taxation policy caused great confusion in the real estate market, I am concerned that failing to properly introduce a system that will bring fundamental changes to the financial market might cause similar confusion in the market."

Jo evaluated, "The government's decision to postpone the Financial Investment Tax for two years and comprehensively review various aspects is a good move."

Regarding this, Deputy Prime Minister for Economy and Finance Choo Kyung-ho said, "This is a tax system that brings comprehensive changes to financial taxation," and added, "In a situation where market uncertainty is high and volatility is expected to be large, it is necessary to postpone such a major change in the system for the time being and later consider various intentions and market conditions," maintaining the stance of a 'two-year postponement.'

Meanwhile, the ruling and opposition parties submitted an amendment to the Income Tax Act that includes postponing the implementation of the Financial Investment Tax. The parties plan to hold a tax subcommittee meeting on the 21st to discuss the postponement of the Financial Investment Tax in earnest.

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