Concerns have been raised that the introduction of a windfall tax in the financial sector could lead to legal risks such as violations of constitutional property rights, prohibition of double taxation, and infringement of equality rights.
On the 10th, the Korea Institute of Finance stated this in its report titled "Key Issues and Implications of the Windfall Tax." Recently, a bill to amend the "Financial Consumer Protection Act," which imposes a windfall tax on the financial sector, was proposed in the National Assembly. The core idea is for the government to recover part of the excess profits earned by financial companies due to high interest rates in the form of contributions and use the collected funds to alleviate the financial burdens of vulnerable groups and small business owners among financial consumers.
The institute analyzed that the proposed amendment in the National Assembly carries legal risks such as violations of the "principle of proportionality," the "principle of clarity," infringement of property rights, violation of the prohibition of double taxation, and infringement of equality rights.
The amendment sets the windfall tax imposition criterion as profits exceeding 120% of the average net interest income over the previous five years. The institute pointed out that there is significant legal uncertainty as to whether this violates the "principle of proportionality," which must be observed when restricting constitutional property rights by law.
Additionally, since restrictions on property rights must be based on clear requirements stipulated by law, the delegation of necessary matters such as the method for calculating excess profits, procedures for contribution payment, measures for non-payment, appeal procedures, and exemption methods to the President raises the possibility of violating the principle of clarity.
The institute also noted that since corporate tax is already imposed, additional taxation on the excess profit portion may violate the prohibition of double taxation principle, and there are claims that imposing a windfall tax on financial companies constitutes unequal treatment compared to other industries.
The institute stated, "While strengthening the social role of financial companies, it is necessary to seek sustainable win-win financial measures that do not undermine corporate value," adding, "Institutional infrastructure improvement, enhancement of social awareness regarding financial services, and financial innovation are ways to contribute to sustainable win-win finance."
© The Asia Business Daily(www.asiae.co.kr). All rights reserved.
