The Democratic Party Holds 'Emergency Roundtable' on Financial Investment Tax... "If Implemented, December Panic Market Is Inevitable"

"14 Million Investors Unite to Oppose Democratic Party Lawmakers if Financial Transaction Tax Introduced"
"Have They Created a Fair Market Worth the Tax?"

[Asia Economy Reporter Lee Ji-eun] Regarding the financial investment income tax (Geumtu Tax), which has sparked sharp differences of opinion between the government and ruling party and the opposition over its introduction next year, Yeouido Research Institute, the think tank of the People Power Party, held an emergency roundtable on the 17th to gather public opinion. The panelists participating in the roundtable agreed that if the Geumtu Tax is confirmed, there are concerns about a collapse of the stock market.

Jung Eui-jung, president of the Korea Stock Investors Association, said at the roundtable held at a cafe near the People Power Party headquarters in Yeouido, "If the Geumtu Tax passes the National Assembly on the 2nd of next month, a panic market in December is inevitable," adding, "If the 1% of large individual investors who think, 'Why should I invest in stocks in an unfair Korea while paying more taxes?' leave first, the remaining 99% will inevitably suffer losses."

The deadline for the standing committee to review the tax reform plan, including the Geumtu Tax, is less than two weeks away on the 30th of this month. If the review is not completed by then, the government’s proposal will automatically be submitted to the plenary session on the 1st of next month. The government has proposed a two-year deferral of the Geumtu Tax, but the Democratic Party plans to reject the government’s proposal and implement the tax as scheduled.

If the Geumtu Tax is introduced, profits from financial investments such as stocks and bonds exceeding 50 million KRW will be taxed at 20% (25% for amounts exceeding 300 million KRW), so according to President Jung, large investors earning more than 50 million KRW have little incentive to remain in the domestic stock market.

President Jung pointed out, "Some Democratic Party lawmakers know that pushing through the Geumtu Tax could cause a major shock to the stock market and lead to a decline in stock prices, but many Democratic lawmakers, including opposition finance committee members, insist it must be done," adding, "They are trapped in the logic of 'no tax cuts for the rich' and are not seriously considering the consequences."

He also emphasized that if the Geumtu Tax is introduced, he will launch a 'defeat campaign' against the Democratic Party. President Jung said, "If the Geumtu Tax is pushed through, we will unite with 14 million investors to vigorously carry out a campaign to defeat Democratic Party lawmakers."

There was also criticism that creating a fair market environment should come before the introduction of the Geumtu Tax. Lee Dae-ho, editor of Y-Street, said, "If a market is created where paying taxes is not regrettable, a market fair enough to justify the tax, then naturally taxes should be paid," but he pointed out, "However, since full taxation is being implemented before that is achieved, not only the 1% who pay taxes but also the 99% who could be collateral damage are angry."

The Democratic Party is pushing for the introduction of the Geumtu Tax, arguing that deferring it would be a tax cut for the rich, but there are also criticisms that it only fattens the pockets of truly wealthy foreign investors. President Jung said, "Foreigners pay capital gains tax in their home countries when they earn profits in the Korean stock market, but among foreign investors investing through tax havens, only those holding more than 25% of a single stock pay taxes, while those holding 24.99% pay no tax even if they earn 10 billion KRW," adding, "In 2017, the Democratic Party tried to lower the 25% threshold to 5% but withdrew due to foreign opposition."

There is also criticism that the situation has changed 180 degrees compared to two years ago when the Geumtu Tax was decided. Kim Byung-chul, senior expert of the People Power Party, said, "In 2020, when the Geumtu Tax was decided, the global economy was expected to grow 4%, and the stock index rose 35% compared to the beginning of the year, so market conditions and the economy were relatively favorable," adding, "Now, major countries are tightening monetary policy, and with US interest rate hikes, the possibility of capital outflow is increasing, so the negative impact on the market from the introduction of the Geumtu Tax could be significant."

Seong Il-jong, chairman of the People Power Party Policy Committee, also participated in the meeting to lend support. Chairman Seong said, "If there is no deferral measure for the Geumtu Tax, it could cause confusion in the financial market and a significant stock price crash, resulting in enormous asset losses for investors," adding, "I hope the Democratic Party will respond proactively and quickly on this matter."