[Asia Economy Reporter Kang Nahum] Amid strong backlash against the lowering of the major shareholder threshold for stock capital gains tax to 300 million KRW, the People Power Party has proposed the 'Donghak Ant Protection Act,' which maintains the major shareholder threshold at the original 1 billion KRW. The ruling party appears to be hesitating on countermeasures while the opposition takes direct action.
On the 7th, Ryu Seong-geol, a member of the National Assembly's Planning and Finance Committee from the People Power Party, proposed a partial amendment to the Income Tax Act that abolishes the controversial 'family joint liability' rule in the major shareholder criteria related to capital gains on stocks and maintains the market capitalization threshold at the current 1 billion KRW.
This move responds to criticisms that expanding the major shareholder scope amid a growing economy is unreasonable. Under current law, anyone holding more than 1 billion KRW in a single stock is defined as a major shareholder and is subject to capital gains tax of 22-33% (including local tax) on gains. The government decided to gradually expand the major shareholder criteria and strengthen capital gains tax standards according to the '2017 Tax Law Amendment.' Accordingly, from April 2021, shareholders holding more than 300 million KRW in a single stock must pay capital gains tax on profits.
There are concerns that if individuals rush to sell stocks to avoid taxes by the end of this year, the stock market could enter a downturn.
Representative Ryu stated, "If unnecessary volatility increases in the stock market, those with less investment experience and lower market understanding?ordinary citizens?will be the most affected, rather than wealthy investors with longer experience and larger investments," adding, "We will protect the newly participating 'Donghak Ants' by preventing the government from arbitrarily changing the major shareholder criteria."
Within the ruling party, voices of concern have been raised, led by Representatives Kim Byung-wook and Yang Hyang-ja, but there has been no significant movement to block the enforcement decree yet. The People Power Party has thus taken a preemptive stance through the bill proposal ahead of the ruling party.
Meanwhile, Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, stated on the same day that the enforcement decree will proceed as planned. At the National Assembly audit held at the Government Sejong Complex, in response to a question from Democratic Party member Go Young-jin about whether the 300 million KRW threshold would be applied from April next year, Hong replied, "That was a decision made by the government in the second half of 2017."
Hong acknowledged, "We understand well the significant role individual investors and 'Donghak Ants' played during the COVID-19 crisis response," but emphasized, "However, this matter is not intended as a tax increase but rather focuses on tax fairness."
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