Abolition of Financial Investment Tax and Expansion of ISA... Will the Ministry of Economy and Finance's Legislative Tasks Pass the Temporary National Assembly?

As the National Assembly convened a plenary session on the 19th and entered the February extraordinary session, attention is focused on whether the Ministry of Economy and Finance's key core policy legislative tasks can overcome the high hurdles of this National Assembly. Regarding the abolition of the financial investment income tax (Geumtu Tax) declared by President Yoon Seok-yeol, the ruling Democratic Party of Korea has been pouring out criticisms such as 'tax cuts for the rich' and 'populism,' making it unlikely that persuading the opposition party will be easy. The extreme confrontation between the ruling and opposition parties ahead of the general election is also an obstacle.

Choi Sang-mok, Deputy Prime Minister and Minister of Economy and Finance, appeared at the plenary meeting of the National Assembly's Planning and Finance Committee in the afternoon to appeal to the National Assembly for the passage of key legislative tasks. He will also attend the plenary sessions on the 20th and 21st and participate in the government questioning on economic affairs on the 23rd. Except for the 22nd, he will be stamping his 'attendance' at the National Assembly throughout the week.

[Image source=Yonhap News]

The Ministry of Economy and Finance has seven major legislative tasks to handle in this extraordinary session. Among them, the most contentious legislative task is the 'abolition of the Geumtu Tax,' which President Yoon personally declared on the first trading day of the new year by visiting the stock market. In this regard, Park Dae-chul, a member of the People Power Party, proposed amendments to the Income Tax Act and the Restriction of Special Taxation Act on the 2nd to abolish the Geumtu Tax. For the Geumtu Tax to be abolished, it must pass the plenary session, but the Democratic Party, which holds the majority of seats in the National Assembly, has expressed opposition due to concerns about revenue reduction and populism. Lee Jae-myung, leader of the Democratic Party, clearly stated his opposition, saying, "Ahead of the general election, the government and ruling party are recklessly issuing election-friendly, populist policies."

Park also proposed an amendment to the Restriction of Special Taxation Act that includes strengthened support for Individual Savings Accounts (ISA) as a follow-up measure to the economic policy direction and public livelihood discussion. The amendment reflects the government's plan to increase the ISA contribution limit from 20 million won to 40 million won annually and raise the tax exemption limit from the current 2 million won (4 million won for low-income earners and farmers/fishermen) to 5 million won (10 million won for low-income earners and farmers/fishermen). Additionally, he proposed amendments to the Restriction of Special Taxation Act that allow up to a 20% income deduction if card usage increases by 5% and provide individual consumption tax reductions when replacing old vehicles.

The extension of the temporary investment tax credit (Imtu Tax), expansion of the research and development (R&D) investment tax credit, and special tax treatment for unsold houses in non-metropolitan areas mentioned in the 1·10 real estate measures are also included in the amendment to the Restriction of Special Taxation Act proposed by Ryu Seong-gil of the People Power Party on the 2nd. The application period for the Imtu Tax, which was scheduled to end last year, will be extended for one more year until the end of this year, and the tax credit rate for increased R&D expenses will be temporarily raised by 10 percentage points. The core of the measure is to apply the one-household-one-home special case for capital gains tax and comprehensive real estate tax when a single homeowner acquires an unsold house in a non-metropolitan area.

The problem is that this extraordinary session is marked by extreme confrontation between the ruling and opposition parties over political issues such as the introduction of 'dual special investigations (special investigation bills on Kim Geon-hee's stock manipulation allegations and the Daejang-dong 5 billion won club),' making it difficult to reach bipartisan agreement on major bills. With only 50 days left before the general election and the electoral district delimitation bill yet to be decided, there is a possibility that livelihood bills may be buried amid the handling of political issues.

Within the Ministry of Economy and Finance, there is an optimistic view that since many livelihood tasks are included among the legislative tasks, the opposition party will have no choice but to agree ahead of the general election. Deputy Prime Minister Choi indicated at a press briefing last week, "We will make the most of two opportunities, not only the February extraordinary session but also the National Assembly after the April general election," suggesting that even if legislation is blocked in the February session, they will pursue legislation again.

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