[Yeouido Interview] "'Please stop the financial investment tax' Dozens of calls a day... Ants bear the brunt of taxation"

Heated Debate Between Ruling and Opposition Parties Over Financial Investment Tax
Park Dae-chul: "Democratic Party Should Take a Progressive Stance"

Chairman Park Dae-chul of the National Assembly Budget and Accounts Committee. / Photo by Yoon Dong-ju doso7@

[Asia Economy Reporter Lee Ji-eun] "We are receiving dozens of complaint calls every day at the lawmakers' offices from retail investors pleading, 'Please stop the implementation of the Financial Investment Income Tax (Geumtu Tax).' They are urging the Democratic Party of Korea to take a more progressive stance on the Geumtu Tax, and they are hoping for just that."

In an already delayed review of the tax reform bill, as the ruling and opposition parties continue to clash over the postponement of the Geumtu Tax, Park Dae-chul, chairman of the National Assembly's Planning and Finance Committee, expressed his frustration.

After Lee Jae-myung, the party leader of the Democratic Party, recently announced a position in favor of postponement, the party internally shifted its weight toward the government's and ruling party's postponement policy. However, they counter-proposed a "conditional postponement plan," adding demands such as withdrawing the government's plan to raise the major shareholder threshold for stock transfer tax and further reducing the securities transaction tax. The government rejected this, and the opposition reiterated that "we must proceed according to principle," leaving Chairman Park struggling to devise a strategy regarding the Geumtu Tax postponement.

Chairman Park intends to lead the effort to secure the Geumtu Tax postponement against the Democratic Party, but overcoming the 'minority ruling, majority opposition' political landscape does not seem easy. He expressed concern, saying, "If this continues as is, it will cause significant damage and confusion to the stock market and retail investors," and added, "I question whether the Democratic Party is confident enough to handle the side effects, aftereffects, and damages that could arise from pushing this through. I wonder if there is any reason to take such a risk."

The opposition claims that postponing the Geumtu Tax is a "tax cut for the wealthy" and that it could lead to a shortfall in tax revenue. However, Chairman Park emphasized that the Geumtu Tax should "not be viewed solely as a tax cut for the wealthy," and said, "While concerns about reduced tax revenue due to postponement exist, the benefits far outweigh the losses."

What he worries about is the negative ripple effect the implementation of the Geumtu Tax could have on the market. Chairman Park explained, "Based on the average stock trading records over the past decade, the number of taxable individuals under the Geumtu Tax for listed stocks is 150,000," adding, "This is not a small number. It is ten times the current 15,000 major shareholders subject to domestic stock taxation, and when including investors in other financial products such as bonds, funds, and derivatives, the actual number of taxpayers will be even higher."

If these 150,000 taxable individuals sell off large amounts of stocks at the end of the year to avoid taxes, a stock market crash at year-end is inevitable. Chairman Park pointed out, "If the Geumtu Tax is imposed, many will say, 'I'll just invest in U.S. stocks instead,'" and warned, "If high-net-worth domestic investors massively shift to overseas stocks, it could also negatively impact the exchange rate."

In fact, this law targets only 14 million retail investors, excluding foreigners and institutions, leading to criticism that it is a "tax burden solely on retail investors." Chairman Park stated, "The government and the People Power Party are well aware that the Geumtu Tax has the potential to impose a 'tax burden solely on retail investors,'" and assured, "We will not forget our promise to the 14 million retail investors."