Value-Up Momentum... Depends on 'Tax Benefits'

Tax Support Measures Missing from Value-Up Guidelines
Opposition Party Resistance Makes Realization Difficult
Without Confirmed Tax Incentives, Early-Year Uptrend Hard to Sustain

Concerns have been raised that the later the announcement of tax benefit measures related to the Value-Up program is delayed, the weaker the rebound momentum in the stock market may become. Although the financial authorities have disclosed the guidelines for the Value-Up program, they did not mention the specific level or timing of tax support. The securities industry predicts that without confirmed tax-related incentives, it will be difficult for the stock market to show a strong upward trend like at the beginning of the year.

The 2nd seminar on support measures for corporate value-up to boost the Korean stock market was held on the 2nd at the Korea Exchange. Jeong Jiheon, Executive Director of the Management Support Headquarters at the Korea Exchange, is presenting on "Progress and Future Plans for Promoting Corporate Value-Up Support Measures." Photo by Heo Younghan younghan@

On the 2nd, the Financial Services Commission held the second seminar on corporate Value-Up support measures and unveiled the draft guidelines and explanatory notes for the corporate value enhancement plan. However, the guidelines did not include specific details on the tax benefits that had attracted market attention.

Earlier, at the end of last month, Deputy Prime Minister and Minister of Strategy and Finance Choi Sang-mok mentioned tax incentives, stating, "We will introduce corporate tax credits for companies that increase shareholder returns such as dividends and share buybacks, and pursue separate taxation on dividend income for shareholders of companies that expand dividends." Since the success of the Value-Up program depends on corporate participation, the plan is to prepare tax support measures such as reductions in corporate tax and dividend income tax to encourage company involvement.

However, during the panel discussion held immediately after the guideline announcement, a Financial Services Commission official only gave a general statement, saying, "We will announce the Value-Up tax support measures once the detailed review is completed."

Nonetheless, it may not be easy to realize the tax support measures expected by the market. The corporate tax and dividend tax benefits that the Ministry of Strategy and Finance has announced are matters requiring legislative amendment. The government must not only announce the plan but also bring it to the National Assembly to seek cooperation from the opposition Democratic Party. However, there is a possibility that the opposition will oppose it, citing "tax cuts for large corporations."

Moreover, it is known that discussions are ongoing within the government regarding the level of tax reductions, timing of the announcement, and the announcing body. Considering the timetable for the financial authorities to disclose the final Value-Up program in May, there is speculation that the final plan will unlikely include tax support measures.

Even if the government releases tax support measures within this month, discussions to realize them are expected to be possible only during the regular National Assembly session in September. A Ministry of Strategy and Finance official said, "Specific details on tax support measures are still under discussion," adding, "Since tax law discussions usually take place during the regular National Assembly rather than the extraordinary session, it will likely take time until actual implementation."

Some worry that after the general election, policy momentum such as tax incentives and the abolition of the financial investment income tax may weaken due to opposition party resistance. There are also opinions that this could affect the stock market, causing the Value-Up-driven upward momentum to fade.

Ji-hyun Kim, a researcher at Kiwoom Securities, said, "As policy uncertainty has been highlighted, stocks with low price-to-book ratios (PBR) have given back the gains made in January and February, and the PBR has returned to the level at the beginning of the year," adding, "If tax incentives are not confirmed, it will be difficult to see a strong upward trend like at the start of the year." She also noted, "However, there is potential for a rebound after the start of voluntary disclosures and confirmation of participating companies this month."

Kyung-yeon Lee, a researcher at Daishin Securities, forecasted, "Tax support incentives related to the Value-Up program will be announced separately," and "The market may show a rebound at that time."