President Lee Jae-myung said on the 24th, "Improvements in the capital market system have a dual effect of increasing investment in innovative new growth companies and also increasing the income of ordinary individual investors," adding that "the reform of the dividends tax system needs to be discussed from this perspective." This statement reflects President Lee's intention to introduce dividends separate taxation ahead of the first tax reform proposal from the Lee Jae-myung government, which proclaimed the 'KOSPI 5000 era.'
On the same day, President Lee chaired a meeting with senior aides at the Presidential Office and remarked, "There is nothing more important than the issue of livelihood. If corporations survive, the country's economy survives, and more citizens must invest for corporations to thrive." He also noted, "I would like to mention this opportunity: I hope domestic financial institutions will not just cling to easy interest plays like residential mortgage loans and interest income, but also pay attention to expanding investments."
Dividends separate taxation is a policy that President Lee proposed during the last presidential election as a measure to revitalize the stock market. Shortly after his inauguration, on the 11th of last month, he also visited the Korea Exchange and stated, "We are preparing a tax reform to promote dividends." At that time, he specifically mentioned the income tax law amendment proposed by the Democratic Party of Korea member Lee So-young. The proposal is to tax dividends separately for listed corporations with a payout ratio of over 35%, lowering the highest tax rate to 27.5%. The aim is to increase the payout ratio with 'bold incentives.'
The current tax law imposes a tax rate of 15.4% on financial income (dividends and interest) up to 20 million won per year. If it exceeds 20 million won, a maximum progressive tax rate of 49.5% is applied under comprehensive taxation on financial income. It has been reported that the ruling party is discussing a plan to significantly lower this highest tax rate to around 30%. However, since most dividends go to a very small number of major shareholders, there are considerable arguments within the party that it constitutes 'tax cuts for the rich.' Until the end of last year, the Democratic Party had publicly stated in settings like the National Assembly countermeasure meetings that "dividends are a typical example of ultra-wealthy tax cuts" and declared their refusal to accept such measures.