Korea Pays Fewer Dividends Than China... President Lee Announces Tax Reforms to Promote Dividend Payouts

President Lee Jae Myung Announces Tax and Institutional Reforms
Aims to Promote Corporate Dividends as an Alternative Investment to Real Estate

President Lee Jae Myung is presiding over an on-site meeting to eradicate unfair trading in the stock market held at the Korea Exchange in Yeongdeungpo-gu, Seoul on the 11th. Photo by Yonhap News

President Lee Jae Myung announced on the 11th that the government will introduce tax and institutional reforms to encourage corporate dividend payouts. The plan is to expand corporate dividends and guide citizens to use them as an alternative investment vehicle comparable to real estate.

During his visit to the Market Surveillance Committee of the Korea Exchange on this day, President Lee held an on-site meeting and stated, "We are a country that hardly pays dividends," adding, "We pay even less than China." He continued, "In other countries, people buy blue-chip stocks, receive interim dividends, use them for living expenses, and this helps boost domestic demand and creates a virtuous economic cycle. But in our country, dividends are not paid," he repeatedly pointed out. He then revealed, "We are preparing tax and institutional reforms to promote dividend payouts."

President Lee further emphasized, "If our citizens can now receive interim dividends through stock investments and use them for living expenses, making it an alternative investment vehicle on par with real estate, it will also make it easier for companies to raise capital," adding, "I believe the entire Korean economy could enter a virtuous cycle, with the securities market at the core of this process."

President Lee also shared his thoughts on the undervaluation of Korean stocks, commonly referred to as the 'Korea Discount.' He commented, "It has now become difficult to make long-term investments in blue-chip stocks," and criticized, "Due to things like physical spin-offs and mergers and acquisitions (M&A), the stocks I own, which were solid blue-chip stocks, suddenly become hollow shells."

He also directly introduced the proposed amendment to the Income Tax Act submitted by Democratic Party lawmaker Lee Soyoung. The bill centers on applying a separate tax rate to dividend income from listed companies with a dividend payout ratio of 35% or higher. President Lee stated, "Including such measures, if companies pay dividends properly and it does not significantly impact tax revenues, it would be better to lower the tax rate and encourage more dividend payouts," adding, "We will explore as many viable options as possible."

At the same time, he expressed a strong commitment to strictly crack down on unfair trading practices. Kang Yoo Jung, spokesperson for the presidential office, said in a briefing, "President Lee considers the role and responsibility of the Korea Exchange Market Surveillance Committee, which is in charge of eradicating unfair trading, to be extremely important," adding, "He has instructed that the system be improved to promptly detect unfair trading methods, especially in response to new schemes, and to actively consider expanding the organization and personnel for swift investigations."

Spokesperson Kang stated, "The new administration plans to introduce a one-strike-out system for unfair trading such as stock price manipulation, and will strictly punish offenders by imposing and recovering fines for unjust gains."