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Financial watchdog chief urges scrapping of capital gains tax despite political headwind

Published: 28 May. 2024, 16:53

SHIN HA-NEE
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Attendees of the Capital Market Value-up International Seminar, including Financial Supervisory Service Gov. Lee Bok-hyun, sixth from left in the first row, Korea Financial Investment Association Chairman Seo Yoo-seok, eighth from left, and Financial Services Commission Chairman Kim Joo-hyun, tenth from left, pose for a photo at the venue in western Seoul on Tuesday. [KOREA FINANCIAL INVESTMENT ASSOCIATION]

The chief of Korea’s financial regulator called for scrapping the upcoming capital gains tax, as President Yoon Suk Yeol's promise to abolish the proposed tax scheme continues to face strong opposition from the Democratic Party (DP).

“If the capital gains tax is imposed as previously proposed, it will add to woes and confusions for 14 million retail investors who are the backbone of our capital market,” said Financial Supervisory Service (FSS) Gov. Lee Bok-hyun said Tuesday in his remarks during the Capital Market Value-up International Seminar held in western Seoul.

The event was attended by Financial Services Commission Chairman Kim Joo-hyun, Korea Financial Investment Association Chairman Seo Yoo-seok and Yoshio Horimoto, vice commissioner of Japan’s Financial Supervisory Agency.

The capital gains tax — first introduced by former President Moon Jae-in — was scheduled to take effect in 2025 after the Yoon Suk Yeol administration implemented a two-year extension of the grace period in 2022.

However, Yoon vowed to abolish the tax altogether earlier this year. With the DP maintaining its majority in the incoming parliament, Yoon's plan is expected to face gridlock.

The FSS chief also said that “it has been argued that a lack of legal protections for minority shareholders is undermining investors’ trust in the capital market,” stressing that “it is necessary to discuss measures to fundamentally improve the corporate governance structures” in Korean companies to enhance protection measures for retail investors.

BY SHIN HA-NEE [[email protected]]