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DP to review lowering capital gains tax threshold amid public backlash

Published: 03 Aug. 2025, 15:28 Updated: 04 Aug. 2025, 16:41

Democratic Party floor leader Kim Byung-kee speaks at a meeting held on Aug. 1 at the National Assembly in western Seoul. [YONHAP]

The Democratic Party (DP) will review a possible reversal of the government’s plan to lower the threshold for capital gains tax on major shareholders in response to investor backlash following the announcement of a sweeping tax reform plan.

“There are widespread concerns about the tax overhaul,” said DP floor leader Kim Byung-kee in a Facebook post on Friday after the stock market closed for the day.

"Our party’s special committee on tax normalization and the special committee on the 'Kospi 5000' will review the feasibility of returning the threshold for major shareholders back from 1 billion won [$720,000]. We will work closely with the administration to restore investor trust."

On Friday, the Kospi plunged 126.03 points, or 3.88 percent, to close at 3,119.4 — the largest single-day drop in four months. The tech-heavy Kosdaq slid 32.45 points, or 4.03 percent, to 772.79.

Analysts cited the tax plan — which includes a 1 percentage point hike in corporate taxes, a 0.1 percentage point increase in securities transaction taxes and lowering the capital gains tax threshold for major shareholders from 5 billion won to 1 billion won — along with fallout from Korea-U.S. tariff negotiations as drivers of the sell-off.

An hour after Kim posted his statement, the DP’s special committee on the "Kospi 5000" initiative of the Lee Jae Myung government issued a statement echoing the concerns of investors.

A screen in Hana Bank's trading room in central Seoul shows the Kospi closing at 3,119.41 points on Aug. 1, down 126.03 points, or 3.88 percent, from the previous trading session. [YONHAP]

“The government’s tax proposal has yet to be finalized, as it must go through the legislative process,” the committee said. “During the National Assembly’s review, we will thoroughly discuss the legitimacy and effectiveness of each clause and aim to establish reasonable standards in line with public expectations.”

The committee also highlighted that the National Assembly’s Legislation and Judiciary Committee passed a second amendment to the Commercial Act that includes shareholder-friendly measures such as mandatory cumulative voting and the separate election of audit committee members.

“Markets usually go through a brief correction after hitting a peak, but if the downturn persists, it becomes a serious issue — which is why the party moved quickly to issue a message,” a lawmaker in the DP leadership said.

The move is seen as an attempt to stem market fears amid mounting backlash against the administration’s push for tax hikes, which the DP has framed as a recovery from former President Yoon Suk Yeol’s tax cuts for the wealthy.

Online communities of retail investors were flooded with criticism, including: “The president should fix this before going on vacation” and “You ruin everything and then start looking for solutions?”

Kang Yu-jung, spokesperson for the presidential office, briefs reporters at the presidential office in Yongsan District, central Seoul, on Aug. 1. [NEWS1]

DP Policy Committee Chair Jin Sung-joon, who had openly advocated for tightening capital gains tax rules throughout the reform discussions, drew particularly heavy criticism. A petition opposing the lower threshold for capital gains tax on major shareholders surged past 46,000 signatures on the National Assembly website Friday.

The presidential office, however, said it is not currently reviewing the threshold issue.

“There is no ongoing review," spokesperson Kang Yu-jung said. “If the party or lawmakers propose a change, we will consider it — but we are not at that stage yet.”

On the sharp drop in the Kospi, Kang added that “It is difficult to claim a direct cause-and-effect relationship between the market movements and the tax proposal. The correlation requires thorough analysis.”

Translated from the JoongAng Ilbo using generative AI and edited by Korea JoongAng Daily staff.
BY SHIM SAE-ROM [[email protected]]