"Changing Major Shareholder Capital Gains Tax Threshold Offers No Real Tax Benefit... Only Retail Investors Suffer"

Industry and academic experts have voiced concerns over the tax reform plan being pursued by the Lee Jaemyung administration. In particular, they argue that the proposal to lower the threshold for major shareholders subject to capital gains tax on stocks from 5 billion won to 1 billion won runs counter to the administration's stated goal of ushering in the 'KOSPI 5000 era.'

On August 7, the Policy Committee of the People Power Party held a forum at the National Assembly titled 'Evaluation and Market Impact Analysis of the 2025 Tax Reform Plan; For Whom Is the Lee Jaemyung Administration's First Tax Hike Intended?' and shared these concerns.

Yonhap News Agency

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On July 31, the government announced the direction of tax law revisions, proposing to expand the tax base by lowering the threshold for capital gains tax on stocks. The plan would expand the definition of a major shareholder subject to capital gains tax from 'holding 5 billion won or more in a single stock' to 'holding 1 billion won or more in a single stock.' In addition, the government stated its intention to raise both corporate tax and securities transaction tax rates.

Song Eonseok, acting leader and floor leader of the People Power Party, expressed concern, saying, "If investors sell off stocks at the end of the year to avoid taxation, the stock market will be shaken, and retail investors will inevitably be negatively affected." He added, "With additional taxes being imposed on companies already burdened by Korea-US tariff negotiations, corporate performance will deteriorate." Kim Jungjae, chairman of the party's policy committee, also criticized, "Immediately after the announcement of the tax reform, 16 trillion won in market capitalization evaporated overnight," adding, "This has fundamentally shaken trust in the market by sending the wrong signal."

Industry and academic experts also voiced their concerns.

Regarding the corporate tax increase, they pointed out that it runs counter to global trends. Under the tax reform plan, raising the corporate tax rate by 1 percentage point across all brackets would bring the top rate to 25%, which is higher than the global average of 21%. Kim Daejong, professor of business administration at Sejong University, noted, "Ireland reduced its corporate tax rate from 50% to 12%, and the Trump administration in the US also announced plans to lower it to 15%. If Korea moves in the opposite direction, it will drive companies overseas and lead to job losses."

There were also predictions that raising tax rates would not necessarily lead to increased tax revenue. Lim Dongwon, senior research fellow at the Korea Economic Research Institute, explained, "When Japan lowered its corporate tax rate, retained earnings from overseas flowed back into the country and were mostly invested in building production facilities."

Regarding the increase in securities transaction tax, experts saw a high likelihood that it would dampen investor sentiment. Lim stated, "Individuals bear 70% of the securities transaction tax, so if it is raised, individual trading volume will decline and market liquidity will decrease." He added, "This runs counter to the government's stated goal of revitalizing the stock market as an alternative to real estate investment."

Caution was also advised regarding the strengthening of the capital gains tax threshold. Oh Moonsung, president of the Korea Tax Policy Association, said, "Whether the threshold is 1 billion won or 5 billion won, the practice of selling at year-end and buying at the start of the year will persist. This will not significantly help tax revenue and will only cause psychological instability in the market."

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