Lee Bok-hyun, Firm on Abolishing Financial Investment Tax, Says "No Plans for Other Public Office" Amid Position Controversy

Remarks at the Second Short Selling Discussion Backbrief on the 25th
"Financial Investment Tax Conflicts with Value-Up... Capital Market Livelihood Issue"
Individual Investors: "Computerization a Prerequisite Before Resuming Short Selling"

The second open discussion session with individual investors was held on the 25th at the Korea Exchange Seoul Office Conference Hall. Lee Bok-hyun, Governor of the Financial Supervisory Service, is delivering the opening remarks. Photo by Heo Young-han younghan@

As the opposition party pushes for the introduction of the financial investment income tax system scheduled for January next year, Lee Bok-hyun, Governor of the Financial Supervisory Service, maintained his stance on abolishing the financial investment income tax on the 25th. He explained that the system directly contradicts the 'corporate value-up policy' aimed at revitalizing the capital market and that the system should be reconsidered from scratch to maximize long-term tax revenue. Regarding recent controversies about his position, he said, "I want to finish my term as governor," but also left open the possibility, stating, "Even if a successor comes in the third or fourth quarter (this year), it should be smooth."

"Financial investment income tax has a much greater negative impact on tax revenue"

On the 25th, Governor Lee Bok-hyun said during a back briefing immediately after the second short-selling discussion, "The government's position on abolishing the financial investment income tax remains unchanged," adding, "When the system was designed several years ago, there was some rationality, but considering changes in the capital market, the negative impact on tax revenue now far outweighs the positive effects."

He also pointed out the conflict between the financial investment income tax system and the government's corporate value-up policy. He said, "Because it can directly clash with the value-up effects we are promoting, we have also received opinions from institutions representing many investors and the industry," adding, "We will coordinate opinions within the government and then convey them to the National Assembly and others."

He further explained, "The capital market itself is fundamentally a livelihood issue that deserves attention," and added, "The 21st National Assembly is emphasizing livelihood and cooperation, and I think the development of the capital market through value-up is the topic that best aligns with the basic direction of the current National Assembly."

The second open discussion session with individual investors was held on the 25th at the Korea Exchange Seoul Office Conference Hall. Lee Bok-hyun, Governor of the Financial Supervisory Service, is delivering the opening remarks. Photo by Heo Young-han younghan@

He also expressed opposition to the proposal to first postpone the introduction of the financial investment income tax. Following the overwhelming victory of the Democratic Party of Korea in the 22nd National Assembly elections, the discussion on abolishing the financial investment income tax, which the government and the People Power Party had been pushing, is at risk of being derailed, leading to calls for postponement.

Governor Lee said, "Personally, I think postponement, if overly discussed, might be a somewhat cowardly decision," emphasizing, "For capital market revitalization such as value-up, we need to analyze how to handle capital income policies, including our dividends and interest income. Although there may be some tax revenue reduction, we need to see if there are ways to increase overall tax revenue in the mid to long term by expanding the total pie despite lower tax rates."

Regarding his position, "I have no intention of moving to another public office"

Governor Lee also made it clear that he will hold onto his position as Financial Supervisory Service Governor for the time being, citing many tasks to be done amid recent controversies about his position. He said, "I have no intention of moving to another additional public office, and finishing well in this position is the way I can contribute socially and publicly," but left room by adding, "By the third or fourth quarter, even if I step down and a successor comes, it should be smooth."

He added, "By around next year, the economic cycle might allow efforts for a rebound, so I hope to handle crisis response until then and hand over an environment where my successor can play a more productive role."

He refrained from commenting on the timing of short-selling system resumption

The second open discussion session with individual investors was held on the 25th at the Korea Exchange Seoul Office Conference Hall. Individuals attending as representative discussants for individual investors are applauding during the participant introduction time. Photo by Heo Younghan younghan@

Regarding improvements to the short-selling system, which was also the topic of the discussion, Governor Lee said, "After listening to opinions from individual investors and the industry, we will make it a topic for internal government discussion," adding, "We will not unilaterally decide on the final legislation or the timing of short-selling resumption." He also said that the interim results of the investigation into illegal short-selling by foreign investment banks (IBs) will be announced as early as early May.

Earlier, some individual investors suggested at the discussion that the timing for resuming short-selling should be after the completion of computerization work. It is expected that infrastructure construction and legal system improvements will take a long time until short-selling computerization is completed. The Financial Services Commission has banned short-selling in the domestic stock market until the first half of 2024 (end of June). Authorities are currently discussing the timing of resumption internally. The discussion was attended by Jeong Ui-jeong, head of the Korea Stock Investors Association; Lee Sang-mok, CEO of the small shareholder platform 'ACT'; YouTubers Jeon In-gu and Park Dong-ho; as well as industry representatives from NH Investment & Securities and Timefolio Asset Management.

The panelists also demanded stronger disclosure on short-selling and harsher penalties for offenders. Regarding the financial investment income tax scheduled to be implemented in January next year, the majority opposed it as premature. The Democratic Party plans to implement the bill as scheduled, citing fair taxation of investment income, while the ruling party, including President Yoon Suk-yeol, is pushing for postponement or abolition of the financial investment income tax. There were also calls for the chairman of the general shareholders' meeting to be appointed as a third party to strengthen small shareholders' rights. There was hope that the corporate value-up policy would be pursued in the long term.