The landslide victory of the liberal opposition in Wednesday’s general election has shaken expectations for President Yun Seok-Yeol’s economic policy, which favors investment in the stock market.
Yun’s People’s Power Party faced a crushing defeat in the parliamentary elections, as the main opposition Democratic Party and its satellite parties won 175 seats in the 300-member National Assembly.
The election results are a signal that most of the current administration’s major economic policies have been announced based on this assumption, and that the efforts of Yun and others to abolish capital gains tax on financial investments and improve corporate valuations will come to a standstill. sent to the market. Enacting legislation after the general election.
“Although the opposition party won a landslide in the election, it is not easy to change the law that has actually been passed.…It is unlikely that the postponement of the gold investment tax will be extended,” said an analyst at High Investment & Securities. Lee Eun-chan said.
The introduction of a financial investment income tax, which imposes a 20% tax on capital gains of 50 million won (approximately $37,000) or more from financial investments such as stocks, bonds, funds, and derivatives, has been postponed until 2025 due to opposition from the retail industry. investors.
The capital gains tax bill was pushed by opposition parties and was introduced in 2020, so the Liberals, who hold a majority of seats, are expected to push for implementation next year.
Market participants said that expectations for tax incentives related to the government’s corporate value enhancement program, which encourages listed companies to increase their corporate value by improving governance and shareholder returns, will “inevitably fade.”
There is uncertainty over the enactment of a tax reform bill that would reduce the corporate tax burden on listed companies that return profits to shareholders through dividends and cancellation of treasury stock.
“As it is unclear whether the tax reform bill will be passed by the National Assembly, the momentum behind the value-up program will likely weaken,” Park So-young, a strategist at Shin-Ei Securities, said in a report.
There are some areas where agreement has been reached between the ruling and opposition parties regarding corporate value improvement programs.
Park said, “The “elimination of the Korea discount” has support from opposition parties, so it is likely that the medium-term direction will be maintained.”
Both the ruling and opposition parties pledged to expand the scope of tax-efficient personal savings accounts and raise the tax-free limit.
Government-initiated Personal Savings Accounts allow consumers to hold a variety of financial products such as cash deposits, funds, and stock investments in a single account tax-free.
Lawmakers hope that easing these regulations will encourage more retail investors to flow into the stock market, driving high-dividend stocks.
As a follow-up to the corporate value improvement program announced by the Financial Services Commission on February 26, the Korea Exchange, the only stock exchange operating company in the country, plans to announce detailed guidelines for the system.
Kim Yong-hwan, a researcher at NH, said, “Considering the positive factors in the Korean stock market, such as the expansion of ISAs and corporate value improvement programs, concerns that the gap between supply and demand among individual investors will continue are overblown. I can see it,” he said. Investments and Securities.
