Finance minister officially kills capital gains tax hike proposal

Koo Yun-cheol, Minister of Finance and Economy talks at a meeting held at the Government Complex in Jongno District, central Seoul, on Sept. 15. [YONHAP]

 
The government decided Monday to maintain the threshold for major shareholders subject to capital gains tax at 5 billion won ($3.6 million) per stock, retreating from an earlier plan to tighten it to 1 billion won following sharp criticism that the move would run counter to the administration’s “Kospi 5000” pledge.
 
Minister of Economy and Finance Koo Yun-cheol, who also serves as deputy prime minister, announced the decision during a meeting of the Democratic Party (DP) and government officials to discuss Chuseok harvest holiday stabilization measures at the National Assembly in western Seoul.
 
 
“Taking into account the public’s desire to see a revitalized capital market, as well as the DP’s position that the threshold should be maintained, we have decided to keep the current standard,” Koo said.
 
“Since the tax reform plan was unveiled in July, we have weighed the need for normalizing taxation against the need to stimulate the capital market. The government will continue to do its utmost to support corporate and economic growth through productive finance and a more vibrant market.”
 
The Finance Ministry in late July had proposed lowering the threshold for major shareholders from 5 billion won to 1 billion won per stock as part of its tax reform plan. The Yoon Suk Yeol administration had loosened the bar to 5 billion won in 2023 from 1 billion won, arguing that the previous standard was overly restrictive. Critics said the change only fueled accusations of a tax cut for the wealthy, with no clear trickle-down effect and no significant boost to the stock market.
 

President Lee Jae Myung holds a press conference inside an airplane on his way to Washington D.C. on Aug. 24. [JOINT PRESS CORPS]

Korea’s main stock market Kospi closes above the 3,400 level on Sept. 15. [YONHAP]

 
However, following the July announcement, the Kospi plunged nearly 4 percent in a single day as retail investors voiced strong opposition. Political pressure ahead of local elections also pushed the government to reverse course.
 
Although the threshold applies only to a relatively small number of individual investors, the rule has been blamed for fueling year-end volatility as major shareholders sell off shares to avoid taxation and then repurchase them at the start of the year.
 
The government’s initial plan was prepared in consultation with the presidential office. With additional revenue from the tighter rule estimated at only 200 billion won annually, officials concluded it was unnecessary to prolong a political standoff. President Lee also signaled flexibility during a Thursday press briefing, saying he “did not see the need” to lower the threshold to 1 billion won.
 
“The decision reflects feedback from the market as well as close discussions with the National Assembly,” said the Finance Ministry in a press release on Monday, adding that beyond this measure, it would push ahead with other policies to strengthen capital markets, including the creation of a 150 trillion won national growth fund and the introduction of business development companies.
 
The Kospi closed at 3,407.31 on Monday, up 11.77 points, or 0.35 percent, marking its first-ever close above 3,400 and its fourth consecutive record high.

This article was originally written in Korean and translated by a bilingual reporter with the help of generative AI tools. It was then edited by a native English-speaking editor. All AI-assisted translations are reviewed and refined by our newsroom.
BY KIM KYUNG-HEE [[email protected]]