Democratic Party's Financial Investment Tax Debate Gathers Consensus but Only Fuels Conflict Amid Commercial Law Amendments

Unified on Improving Corporate Governance
Even Mentioning Abolition of Geumtu Tax
Jung Seong-ho: "Geumtu Tax Suspension Deepens Instability"

The Democratic Party of Korea held a forum on the Financial Investment Income Tax (FIIT) and reached a consensus on improving corporate governance. However, regarding the implementation of the FIIT, which was the main topic of the forum, conflicts are intensifying rather than being resolved, prompting calls for a swift decision.

Members of the Korea Stock Investors Association, who advocate for the abolition of the financial investment income tax, are protesting on the 24th at the National Assembly, demanding to attend the Democratic Party of Korea's policy lawmakers' meeting discussion on financial investment income tax. Photo by Hyunmin Kim kimhyun81@

On the 24th, the Democratic Party's Policy Committee issued a statement saying, "As a result of the FIIT discussion, the necessity and urgency of the stock market value-up policy have been recognized by all, and we will promptly push forward with it," adding, "We will promote the Korea Boost-Up 5 Major Projects as the party's official stance." The Korea Boost-Up project was announced by Policy Committee Chair Jin Seong-jun in July. This project focuses on improving corporate governance through amendments to the Commercial Act, including expanding directors' fiduciary duties, mandating independent directors, and separating the election of auditors.

During the FIIT forum held the previous day, there was consensus on the need to improve corporate governance. Kim Hyun-jung, a Democratic Party lawmaker who supports postponing the FIIT, said, "Small shareholders continue to suffer from issues such as short selling, physical division, split listings, and stock price manipulation," and added, "The Democratic Party should lead amendments to the Commercial Act and Capital Market Act to focus on value-up in the capital market, putting aside the FIIT controversy." Kim Seong-hwan, a Democratic Party lawmaker in favor of implementing the FIIT, argued, "Korean companies have decent competitiveness, but their stock prices are not well supported. The stock market is very opaque and irrational," and emphasized, "There is a severe lack of protection for ordinary shareholders, so both the FIIT and amendments to the Commercial Act must be addressed together."

The Democratic Party appears to be aiming to push through the previously advocated amendments to the Commercial Act in exchange for abandoning the FIIT. The amendment to the Commercial Act was discarded at the end of the 21st National Assembly due to concerns that it would increase uncertainty in corporate management. Earlier this year, President Yoon Seok-yeol called for the preparation of corporate governance improvement measures to protect investors' interests, but the government's response has since shifted toward a cautious approach. On the 11th, Prime Minister Han Duck-soo stated during a parliamentary question session, "There are concerns that it could dampen the business environment, so we are listening to various opinions." Financial Supervisory Service Governor Lee Bok-hyun, who has advocated for the necessity of amending the Commercial Act, said on the 12th, "The intention to push forward with the amendment remains unchanged, but we will communicate with various stakeholders."

The fate of the FIIT, the actual topic of the discussion, remains undecided. The Policy Committee's statement only mentioned that "there is no major disagreement regarding the FIIT system itself." Instead, noise and controversy continue to surround the FIIT. On the 25th, Democratic Party lawmaker Jung Sung-ho said on MBC Radio's 'Kim Jong-bae's Focus,' "I feel that the forum is not resolving conflicts but rather amplifying them, which is regrettable," and added, "I don't think this is an issue that should be left to discussion." He also explained, "Looking at recent developments, postponing the FIIT seems to be exacerbating market instability. Personally, I think it would be better to review the FIIT again after the Democratic Party comes to power and revitalizes the stock market." Initially, the Democratic Party only discussed implementation or postponement, but now the option of abolition has also been considered.

A party members' meeting to decide on the implementation of the FIIT is expected to be held as early as the next day. When asked whether the party's official stance on the FIIT could be decided the following day, Democratic Party lawmaker Jung Sung-ho said, "I believe it should be decided. The sooner, the better," adding, "The longer it drags on, the less desirable it is for the Democratic Party and the more negative the impact on the stock market." Jin Seong-jun, the Democratic Party Policy Committee Chair, explained in a phone call, "We will consult with the party leadership and consider the parliamentary schedule to hold a members' meeting."