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🇰🇷 South Korea /Economy & Trade

Ruling party lawmaker slams government's 'stock price suppression' tax plan as absurd

From Hankyoreh · () Korean

Translated from Korean, summarized and contextualized by DistantNews.

At a glance

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  • The South Korean government proposed a tax revision to prevent 'stock price suppression' by major shareholders, but critics argue it's ineffective and undermines reform efforts.
  • The proposed measure involves taxing stock value with a 30% premium under certain conditions, but experts believe loopholes exist for controlling shareholders.
  • Critics, including a ruling party lawmaker and a corporate governance forum, express disappointment, stating the plan fails to protect minority shareholders or address the Korea discount.

A proposed tax revision aimed at curbing "stock price suppression" by major shareholders has drawn sharp criticism, with opponents arguing it falls short of its goals and could even encourage the practice.

The government's proposal is an absurd law that encourages stock price suppression, and it betrays President Lee's directive to expedite the stock price suppression prevention law.

— Lee So-youngLee So-young, a lawmaker from the Democratic Party, criticized the government's proposed tax revision.

The government's plan, part of its 2026 tax revision, seeks to prevent controlling shareholders from intentionally lowering their company's stock price to reduce inheritance and gift taxes. The proposal suggests taxing stock value at a 30% premium if the price-to-book ratio (PBR) falls within the bottom 25% for KOSPI or 10% for KOSDAQ over the past 13 quarters. This premium would be compared with the average stock price over the last 6.5 years, with the higher amount used for tax calculation.

The government's proposal does not align with the intention of President Lee's order to expedite the 'stock price suppression prevention law' for the normalization of the capital market.

— Korea Corporate Governance ForumThe Korea Corporate Governance Forum commented on the government's tax revision plan.

However, critics like Lee So-young, a lawmaker from the Democratic Party who previously proposed a "stock price suppression prevention law," called the government's plan "absurd" and a betrayal of President Lee Jae-myung's directive to expedite such measures. She argued that the proposed regulation would only apply to a limited number of companies and impose minimal additional taxes, thus failing to incentivize stock price normalization. "It effectively encourages stock price suppression in the long run," Lee stated.

The government's proposal will be perceived as a retreat of reform will and will disappoint many people.

— Korea Corporate Governance ForumThe Korea Corporate Governance Forum expressed concerns about the public's reaction to the proposed tax revision.

The Korea Corporate Governance Forum echoed these concerns, expressing "deep concern" over the revision. The forum argued that the government's criteria are easily circumvented by controlling shareholders who meticulously plan inheritance strategies. They pointed out that companies could manipulate their PBR to avoid falling into the regulated categories. The forum urged the government to consider broader measures, such as adjusting inheritance tax rates and introducing a financial investment income tax, rather than relying on "technical schemes."

The government's proposal is effectively an absurd law that encourages stock price suppression in the long run.

— Lee So-youngLee So-young criticized the limited scope and minimal tax burden of the proposed regulation.
DistantNews Editorial

Originally published by Hankyoreh in Korean. Translated, summarized, and contextualized by our editorial team with added local perspective. Read our editorial standards.

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