[Viewpoint] The Cowardice of the Democratic Party in Handling the Financial Investment Income Tax

Indecision Over Third Postponement or Abolition
Time to Reconsider the Legislative Purpose of 'Tax Justice'
Populist Choices Will Not Benefit the Party

The moment when one truly realizes that the Democratic Party of Korea is the party we have known and currently the opposition is only when they attack the president’s wife. On the other hand, if we look solely at how they handle the medical school quota issue or the financial investment income tax problem, which are the biggest concerns of our society and market, it becomes difficult to gauge the party’s true identity.

This peculiarity likely arises because the Democratic Party itself has no interest in progressive policy lines or social justice, but is solely focused on boosting its approval ratings. The blind belief that they must win the next presidential election at all costs seems to be the driving force behind the current Democratic Party and the only criterion determining their actions.

While it is politically understandable that they might be passive about expanding medical school quotas simply because they ‘do not want to help the current administration,’ even if they agree on its necessity, their indecisiveness over whether to delay the financial investment income tax, which they introduced as the ‘Capital Market Advancement Plan’ four years ago, by two or three years or to abolish it altogether raises questions about the very reason for the party’s existence.

What values does the Democratic Party prioritize over the tax principle that ‘taxes exist where income exists’? The attitude that tax justice can be easily abandoned because the implementation of the financial investment income tax would cause major investors to flee the Korean stock market, leading to an overall decline in stock prices and negatively affecting the votes of ten million individual investors is a serious self-denial and can be called the ultimate populism.

Since the financial investment income tax has already been postponed twice, it is now appropriate to implement it as scheduled. Of course, arguments to delay it once more or to abolish it have their own persuasiveness. However, none of these arguments surpass the grand principle of tax justice. President Yoon Suk-yeol declared at the stock market opening ceremony last January that he would push for the abolition of the financial investment income tax, stating, “We will boldly reform capital market regulations that do not meet global standards to resolve the ‘Korea discount’ to the level of global stock markets.” It is difficult to understand why taxing income is considered not in line with global standards.

Concerns about investors leaving overseas stem from various reasons that have lowered expectations for the domestic stock market, not because the financial investment income tax is the core cause. It is well known that backward corporate governance and insufficient shareholder returns are factors causing the undervaluation of the Korean stock market. The political uncertainty caused by making the law, postponing it twice, and now talking about abolishing it without even implementing it might be the real cause of the Korea discount.

The task for the Democratic Party, which holds the decision-making power on the implementation of the financial investment income tax, is clear. They should focus on minimizing predictable market shocks. Increasing deduction limits, supplementing the system so that long-term investment is not disadvantaged, and preparing for implementation next year is the way to follow the will of the majority of voters who support the Democratic Party’s policy direction.

However, if they yield to the opposition of individual investors and postpone the implementation of this law again, it will be the worst move, throwing the financial investment income tax controversy into the whirlpool of the next general or presidential election. It is time to stop the stock market turmoil that occurs every time the postponement period ends. Postponing the financial investment income tax will not suddenly turn individual investors into Democratic Party supporters, nor will deciding to implement it cause a rebound in the current administration’s popularity. Upholding basic principles is the only way to avoid losing both legitimacy and practical benefits.