Expansion of ISA and Abolition of Financial Investment Tax... Failed to Pass the High Hurdle in the National Assembly

Published 25 Feb.2024 12:48(KST)

Updated 26 Feb.2024 06:55(KST)

The government's plans to expand support for Individual Savings Accounts (ISA) and abolish the Financial Investment Income Tax (금투세, Geumtu Tax) have effectively become unlikely to pass the February National Assembly session. With the final plenary session just four days away, seven major legislative tasks have failed to pass even the subcommittee of the Planning and Finance Committee.

According to the National Assembly on the 25th, the ruling and opposition parties failed to schedule a meeting of the Tax Subcommittee of the Planning and Finance Committee last week. As a result, discussions on key tax law amendments that were supposed to be discussed in the Tax Subcommittee did not take place at all.

Prime Minister Han Duck-soo is responding to a question from Lee In-young, a member of the Democratic Party of Korea, during the government questioning session at the National Assembly plenary meeting on the 22nd. Photo by Kim Hyun-min kimhyun81@

The Ministry of Economy and Finance planned to pass seven major legislative tasks during this month's extraordinary session of the National Assembly, including ▲abolishing the Financial Investment Income Tax ▲expanding ISA support ▲expanding income deductions for card usage ▲reducing the individual consumption tax on old vehicles ▲extending the temporary investment tax credit (임투세, Imtuse) ▲expanding the research and development (R&D) investment tax credit ▲and special tax treatment for unsold houses in non-capital regions.

All of these are also key elements of the Yoon Seok-yeol administration's economic policy direction and public livelihood forums since the new year.

The Ministry of Economy and Finance envisioned that these bills would pass smoothly through the Tax Subcommittee, the Economic and Fiscal Subcommittee, and the Budget and Accounts Subcommittee, and be approved at the full Planning and Finance Committee meeting before the plenary session, but the hurdle of the National Assembly proved to be much higher than expected.

With the general election approaching, the ruling and opposition parties have continued their extreme confrontations, pushing back discussions on sensitive issues requiring tax law amendments. In particular, the opposition party has labeled the government's tax cuts as "tax cuts for the rich" and raised critical voices, making it difficult even to agree on holding the Tax Subcommittee meeting.

During the government questioning session at the National Assembly on the 23rd, Kim Kyung-hyup, a member of the Democratic Party of Korea, criticized that "tax revenue shortages have occurred due to tax cuts for the rich," while Choi Sang-mok, Deputy Prime Minister and Minister of Economy and Finance, rebutted, saying, "The Yoon administration has never implemented tax cuts for the rich. There are only tax cuts to stimulate domestic demand and investor tax cuts for investors."

With the failure to pass tax law amendments in the February extraordinary session, the National Assembly session after the April general election has effectively become the Ministry of Economy and Finance's last chance. Deputy Prime Minister Choi previously indicated in an interview with reporters, "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 attempt to legislate again.