Planned Capital Gains Tax Revision to Reduce Number of Taxpayers by 70%

Seoul, South Korea - A significant change is on the horizon for South Korea's capital gains tax rules, which is expected to reduce the number of large stockholders subject to taxation by approximately 70 percent. This development, revealed on Sunday, comes amid criticisms that it favors the wealthy at a time of declining state revenue.

According to Yonhap News Agency, individuals holding stocks worth more than 1 billion won or exceeding a certain proportion of a company's total ownership by year-end are classified as large shareholders and face a capital gains tax rate of 20-25 percent. At the end of 2022, 13,368 individuals owned shares exceeding 1 billion won in value, while 4,161 had stock values surpassing 5 billion won. The finance ministry's plan involves raising the capital gains tax threshold for shareholders from 1 billion won to 5 billion won, a move intended to minimize year-end market volatility caused by investors selling stocks to evade taxation. If implemented, this revision will decrease the number of taxpayers by 68.9 percent. The ministry aims to revise the enforcement ordinance of the Income Tax Act by the end of the year for implementation starting January 1, following Cabinet approval. Rep. Yang criticized the government's approach, emphasizing the need for new revenue sources to bolster financial stability and enhance social safety nets. South Korea experienced a 50.4 trillion won decrease in tax revenue during the first ten months of 2023, primarily due to weakened corporate activities and a prolonged slump in the property market. The easing of the regulation, a key agenda item during President Yoon's election campaign, was initially agreed upon by ruling and opposition parties for adjustment post-2025. The opposition has accused the government of reneging on this agreement, suggesting the move is a strategy to attract voters in the upcoming April general elections.

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