DP agrees to scrap capital gains tax as stock market struggles

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DP agrees to scrap capital gains tax as stock market struggles

Published: 04 Nov. 2024, 10:28 Updated: 04 Nov. 2024, 18:58

KIM JEE-HEE
[email protected]

Democratic Party leader Lee Jae-myung speaks during a National Assembly meeting Monday. During the meeting he said he agrees to scrap the long-debated plan to impose capital gains tax. The proposed policy was set to take effect from next year. [NEWS1]

Democratic Party (DP) leader Lee Jae-myung announced Monday that the party has agreed to abolish the capital gains tax, aligning with the government’s push to remove it.

"I came to agree with abolishing the capital gains tax, strongly pushed by the government and the [People Power Party],” Lee said during a National Assembly meeting in Seoul.

“If we base our decision on principles and values, [the capital gains tax scheme] should come into effect. However, the Korean stock market is currently in a very difficult situation,” Lee said. “I could not help but consider the situation of some 15 million investors in the market.”

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. Under the proposed plan, retail investors would owe 20 to 25 percent on gains from domestic stock trading valued above 50 million won ($38,000).

The president vowed to scrap the plan altogether in January this year. However, the government and the People Power Party (PPP), aligned with Yoon, faced strong opposition from the liberal Democratic Party, which holds the majority in the National Assembly.

When President Yoon Suk Yeol announced the decision in January in a bid to boost investor sentiment, a DP spokesperson slammed the promise as “a populist policy.”

Upon the announcement, the PPP has been urging the DP to agree on the abolition of the tax, but some opposition lawmakers have insisted that the tax should go into effect as planned, expressing concerns over a potential decrease in tax revenue.

"We welcome the DP's decision to join us, though belatedly, in abolishing the financial investment income tax," PPP leader Han Dong-hoon told reporters.

In a statement, PPP floor leader Choo Kyung-ho said the party will immediately begin negotiations with the opposition to pass a related bill during a parliamentary plenary session this month.

Update, Nov. 4: Added past position of DP, response to decision by PPP.

BY KIM JEE-HEE, YONHAP [[email protected]]