The Lee Jae-myung government is reported to have settled on a direction to largely reverse the 'tax cuts for the wealthy' measures from the Yoon Suk-yeol government in its first tax reform, aiming to increase tax revenue.
The key is to raise the corporate tax rate from the current 24% back to 25%, and to adjust the separate taxation of dividend income for the revitalization of the stock market, so that the benefits of the tax cut do not concentrate on high-income individuals.
According to the relevant ministries on the 27th, the Ministry of Economy and Finance plans to hold a meeting of the Tax Development Advisory Committee soon and announce the '2025 Tax Reform Plan.' It is reported that the Ministry of Economy and Finance has effectively confirmed the main details after consultations with the presidential office.
This reform plan is being introduced under the name 'tax reform plan' instead of 'tax law amendment,' for the first time in three years. This signifies a reorganization of the overall tax framework to differ from the annually repeated tax law amendments and to reflect the policy direction of the Lee Jae-myung government.
The corporate tax will be reverted to 25% by increasing the top rate by 1 percentage point as suggested by the Democratic Party of Korea. This restores the measure that was lowered by the Yoon Suk-yeol government after three years.
The 'major shareholder standard' under which capital gains tax on listed shares is levied will also be reinforced from the previous 5 billion won to 1 billion won. This, too, aims to restore the easement measures from the Yoon Suk-yeol government.
The securities transaction tax rate, which was lowered on the premise of the introduction of the financial investment income tax, is likely to be restored to around 0.18% from the current 0.15%. There are also opinions suggesting that it should be increased to 0.20%. Currently, the KOSPI market has a transaction tax of 0% (excluding The Special Tax for Rural Development at 0.15%), and the KOSDAQ market is at 0.15%.
There is also an intention to correct the 'deformed structure' where only the transaction tax was lowered without introducing the financial investment income tax. It is believed that the shock to the stock market will be less if the financial investment income tax is introduced while maintaining the lowered transaction tax.
Meanwhile, alongside these measures with a nature of tax increase, tax cut plans aimed at achieving the Lee Jae-myung government's national task of reaching a KOSPI of 5,000 are also included.
Notably, this includes the introduction of 'separate taxation on dividend income' to encourage high dividends. Currently, a tax rate of 15.4% is applied to financial income (interest and dividends) up to 20 million won, and the excess is subject to a progressive tax of up to 49.5%. Separating the taxation of dividend income will reduce the tax burden.
However, there is concern that, in this case, the tax cut benefits will inevitably concentrate on high-asset individuals.
Accordingly, the government is considering a plan that applies a tax rate of ▲15.4% for income under 20 million won, ▲22% for income between 20 million and 300 million won, and ▲27.5% for income exceeding 300 million won, based on the legislative proposal from Lee So-young, a member of the Democratic Party of Korea. The tax rates and tax standards are planned to be adjusted somewhat.
Applying the average dividend yield of about 2% in the stock market, one would need to hold stocks worth 15 billion won to generate 300 million won in dividend income. Given the unavoidable controversy over the tax cuts for ultra-wealthy individuals, it seems likely that a tax rate near 30% will be applied to the highest brackets.