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[Alpha Biz=(Chicago) Reporter Kim Jisun] It was reported on the 8th that the government is internally considering a plan to ease stock Capital Gains Tax, which calls for raising the standard for "major shareholders" subject to the imposition of stock Capital Gains Tax from the current KRW 1 billion to KRW 3 billion. The change in the criteria for major shareholders is an amendment to the Enforcement Decree of the Government and can be pursued without the consent of the National Assembly. However, criticism of "tax cuts for the rich" is the key.
The government is said to be considering raising the standard for major shareholders from 1 billion won to 3 billion won per stock. Currently, major shareholders with more than 1 billion won in listed stocks in Korea pay their stock Capital Gains Tax as of the end of each year. Raising the standard to more than KRW 3 billion will reduce the scope of taxation. In other words, it is part of the government's tax relief.
The government considered easing the standard for major shareholders to 10 billion won, but as a result of parliamentary consultations, it was realistic to set the standard at 2 billion won to 3 billion won. The reason was that raising it to 10 billion won could be an excessive 'tax cut for the rich'.
Taxation on stock Capital Gains Tax started in 2000. At that time, the majority shareholder's standard was 10 billion won. Since then, the number of Capital Gains Tax taxation targets has increased and the tax burden has increased as it has fallen to 1 billion won through 5 billion won in 2013, 2.5 billion won in 2016 and 1.5 billion won in 2018. As a result, major shareholders sold a large number of shares at the end of the year to avoid taxes, which deepened instability in the stock market.
The Moon Jae-in government, which maintained its tax tightening stance, tried to lower the standard for major shareholders from 1 billion won to 300 million won. Then, the public petition for the dismissal of former Deputy Prime Minister Hong Nam-ki surpassed 200,000, and the push was canceled due to strong opposition.
The Yoon Seok-yeol administration has continued to push for measures to ease the tax burden on major shareholders. It also abolished the family aggregate rule, which calculates stock holdings by adding shares held by family members such as children and grandchildren, and proposed a plan to raise the standard for major shareholders from 1 billion won to 10 billion won per item. However, due to opposition parties' opposition, the standard for major shareholders could not be raised.
Some point out that raising the standard for major shareholders subject to the transfer tax will not have any significant impact on investors. Even now, most private investors, not major shareholders, do not pay stock Capital Gains Taxs. In addition, from 2025, financial investment income taxes will be imposed on those who earn more than 50 million won in investment income based on domestic listed stocks, regardless of whether they are major shareholders or not. Therefore, even if the major shareholder standard is changed this time, it will only be applied temporarily until the financial investment income tax is introduced in 2025.
AlphaBIZ 김지선(stockmk2020@alphabiz.co.kr)
