On Jan. 2, President Yoon Suk-yeol announced, “I will push for the abolition of the Financial Investment Income Tax.” This move is expected to spark controversy as it involves the cancellation of an agreement with the opposition party.
On this day, President Yoon attended the “2024 Securities and Derivatives Market Opening Ceremony” held at the Korea Exchange building in the Yeouido area of Seoul. In a historic move as a sitting president, he stated, “During my term, I will boldly reform capital market regulations that do not align with global standards and alleviate the ‘Korea Discount.’”
The Financial Investment Income Tax is a taxation system that imposes a tax rate of 20 to 25 percent on profits from financial investments, including stocks, bonds, funds, and derivatives. This tax is applied when annual earnings from domestic stocks exceed 50 million won and when annual earnings surpass 2.5 million won from overseas stocks, bonds, and equity-linked securities (ELS). It is a tax system that levies taxes on profits generated from capital investments in stocks and similar instruments. Originally scheduled to be implemented in 2023, its enforcement was postponed to 2025. At that time, both ruling and opposition parties agreed to delay the implementation of the tax system while maintaining the condition for taxing major shareholders, setting the threshold at 1 billion won.
However, the situation took a sudden turn when the government amended the enforcement decree to relax the major shareholder criteria from 1 billion won to 5 billion won at the end of last year. This sparked controversy over “tax cuts for the wealthy” once again, and the opposition party protested, calling it a “violation of the agreement.” With President Yoon bringing up the card of abolishing the Financial Investment Income Tax, the controversy is likely to intensify further.
The abolition of the Financial Investment Income Tax is a matter that will be determined by the parliament since it is pursued through legislation. Therefore, it is uncertain whether the Financial Investment Income Tax will actually be abolished. On the same day, Kim Byung-hwan, first vice finance minister of economy and finance, stated to reporters at the government complex in Sejong, “If the Financial Investment Income Tax is introduced, a significant number of small-scale investors could be affected,” adding, “If the law is not amended, it is scheduled to be implemented from Jan. 1 next year, so it should be discussed in the parliament within this year.”