Stumbling Over 'Bujagamse' Tax Cut Controversy... Value-Up, Corporate Incentive Plans Undermined

Special Tax Treatment Control Act Passed in National Assembly Plenary Session
Corporate Tax Incentives Desired by Business Community Excluded
Dividend Income Separate Taxation Also Excluded...Securities Industry 'Sighs'

The government's carrot policy of providing corporate tax credits to companies participating in the 'Value-Up (corporate value enhancement) policy' was blocked by the opposition party's 'tax cuts for the rich' frame and failed to pass the National Assembly. Similarly, the policy plan to stimulate demand by taxing dividend income separately for investors who invested in Value-Up companies was also scrapped. This means that all tax incentives, which were a strong inducement to attract the participation of the business community indifferent to the Value-Up policy, were excluded.

According to the Ministry of Economy and Finance and the financial investment industry on the 12th, on the 10th, the plenary session of the National Assembly passed a revised bill on the 'Restriction of Special Taxation Act' including these contents. The government proposal did not include ▲corporate tax credits for companies that expanded shareholder returns for Value-Up ▲shareholder return promotion tax that separately taxes dividend income for individual shareholders ▲expansion plans for ISA tax support, among others.

Since early this year, related institutions centered on financial authorities have been implementing the Value-Up policy aimed at revitalizing the domestic stock market. As part of this, the Ministry of Economy and Finance proposed lowering corporate taxes for companies participating in Value-Up and separately taxing dividend income for investors who invested in these companies. The goal was to stimulate both supply and demand evenly. A vice president of a major domestic asset management firm said, "It is true that expectations for tax incentives were not high from the beginning," but added, "The policy attracted attention because separate taxation of dividend income could somewhat resolve conflicts of interest between major and minor shareholders regarding dividends."

The business community has shown a cynical response to the Value-Up policy, but with the deletion of tax incentives this time, it is evaluated that they have completely turned their backs. According to the Korea Exchange, only 88 companies have disclosed or pre-announced corporate value enhancement plans. This is less than one-twentieth compared to about 2,600 companies listed on KOSPI and KOSDAQ. A business community official said, "Participation was already low, and going forward, all policy advisory fees will be spent on how to respond to the loss of trust in the global market due to the martial law situation," adding, "Companies will hold cash in hand and pursue defensive, risk-response strategies rather than proactive investments."

Similarly, the discussion on expanding ISA support, which was excluded from the final government proposal, was also conceived in connection with the Value-Up policy. In the securities industry, it was regarded as an inducement to attract high-net-worth individuals, called 'Super Gaemi,' to the domestic stock market. The government's plan to expand ISA tax support was modeled after Japan's ISA called 'NISA.' According to the Japan Securities Dealers Association, 1.7 million new NISA accounts were opened from January to March this year, and 47% of the investment amount was utilized in the Japanese stock market.

The securities industry is also sighing while watching the resolution process of this tax law amendment. LS Securities evaluated in a report on the day that although the Value-Up tax incentives for the financial sector were scrapped, the negative impact would be limited as expectations were not high. Researcher Jeon Bae-seung said, "The Value-Up related tax incentives were decided at a considerably reduced level from the beginning, considering the opposition party's backlash," adding, "Nevertheless, the separate taxation of dividend income exceeding 20 million won in financial income was exposed to the issue of tax cuts for the rich and was thus aborted." A financial investment industry official said, "No matter how much the president is impeached and the political situation is led by the opposition party, this is a move that completely undermines the existing Value-Up policy," and raised their voice, saying, "Isn't at least a minimum stock market stimulus necessary when the KOSPI index has fallen below the 2,400 level?"

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