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Korea Herald
29-07-2025
- Business
- Korea Herald
Ruling bloc to raise corporate tax, reversing Yoon-era cut
Corporate tax rate to be raised by 1%p to 25%, minimum holding for capital gains tax to be lowered to W1b South Korea's ruling bloc on Tuesday outlined plans to raise the corporate tax rate and expand the scope of capital gains taxation, signaling a U-turn from policies aimed at tax relief under the previous conservative Yoon Suk Yeol administration. Following a policy consultation held at the National Assembly in Seoul, the government and the ruling Democratic Party said they had agreed to raise the top corporate tax rate from the current 24 percent to 25 percent — the same level as in 2022, before former President Yoon's administration lowered it by 1 percentage point. The plan also includes widening the scope of those subject to capital gains tax. Under current law, individuals who own stocks worth more than 5 billion won (approximately $3.6 million) in a company listed on the Kospi, Kosdaq or Konex — the three markets operated by the Korea Exchange — are subject to capital gains tax when they sell. The ruling bloc aims to lower that threshold to 1 billion won per listed company to broaden the tax base. For unlisted companies, capital gains tax applies to all shareholders regardless of their ownership size. Rep. Chung Tae-ho of the Democratic Party of Korea, a senior member of the Assembly's Strategy and Finance Committee, said the tax changes represent a 'normalization' of the system, restoring tax policies to the levels in place before the Yoon government. The corporate tax rate has seen several changes over the past decades, largely influenced by the shift in political power. It was lowered from 25 percent to 22 percent under President Lee Myung-bak in 2009, raised back to 25 percent under President Moon Jae-in in 2017, and then brought down to 24 percent in 2022 under the Yoon administration, which argued the cut would spur corporate investment. Chung, however, emphasized that 'there is little evidence that the corporate tax cut had a direct effect on investment,' adding that restoring the higher rate would help secure a stable tax base. Regarding the proposed dividend tax scheme, the Ministry of Economy and Finance said it is 'necessary,' citing the importance of redirecting capital flows from the real estate market to capital markets and supporting the growth of strategic and high-tech industries. Meanwhile, the government and the ruling party also discussed introducing a separate taxation scheme for dividend income to encourage shareholder-friendly practices and stimulate the capital market. Currently, dividend and interest income exceeding 20 million won per year is subject to progressive taxation, with rates reaching up to 49.5 percent. Under the proposed changes, a portion of dividend income could be taxed separately rather than being combined with other income, potentially reducing the overall tax burden. Specific criteria for this scheme have not yet been finalized. Tuesday's policy consultation reportedly lasted about 90 minutes and was attended by Democratic Party lawmakers from the Assembly's Strategy and Finance Committee, along with First Vice Minister of Economy and Finance Lee Hyoung-il. Moving forward, the Democratic Party said it will continue discussions through a special task force on tax reform, chaired by three-term lawmaker Kim Yeong-jin, with Rep. Chung Tae-ho serving as secretary.
Korea Herald
10-07-2025
- Business
- Korea Herald
Korea's market cap tops W3,000tr for 1st time amid Kospi rally
Bank of Korea holds rate at 2.5% to curb debt, but signals possible cut within months Fueled by a rally in the benchmark Kospi, South Korea's combined stock market capitalization sharply increased, surpassing the 3,000 trillion won ($2.18 trillion) threshold for the first time Thursday. According to data provided by the bourse operator Korea Exchange, the total market capitalization of stocks listed on the local bourse reached 3,020.8 trillion won as of Thursday's closing. By market, the benchmark Kospi accounted for 2,603.7 trillion won, while the secondary bourse Kosdaq and Konex, known as a stepping stone market, stood at 413.9 trillion won and 3.2 trillion won, respectively. In recent months, the Kospi has experienced a sharp rally, with its market valuation rising by over 600 trillion won from around 1,963 trillion at the end of 2024. The bullish Kospi closed trading at 3,183.23, up 49.49 points or 1.58 percent from the previous trading day. It surpassed the previous year-high set at 3,133.74 in just a day. It was the first time the Kospi had closed above 3,180 since September 2021. Foreign investors and institutional investors each net bought shares worth 445.8 billion won and 41.6 billion won on the Kospi, while retail investors dumped 560 billion won. "While US President Donald Trump continues to exert pressure through tariffs, the market placed more weight on the possibility of a trade deal," analyst Kim Ji-won at KB Securities said. 'The Korean government's policy momentum continues. Expectations for a boost in undervalued stocks have been steadily growing, as measures such as mandatory treasury share cancellations and separate taxation on dividend income are being pushed forward faster than anticipated, aimed at enhancing shareholder value." The expectation for eased monetary policy also fueled the stock market. Though the Bank of Korea held its base rate steady at 2.5 percent Thursday, the market viewed the central bank remains on track for a rate cut. 'The rate freeze is necessary to temper excessive expectations for a rate cut,' BOK Gov. Rhee Chang-yong said at a press conference held shortly after the rate-setting meeting. The rate freeze was executed to rein in mounting household debt amid a resurgent property market. "Housing prices, especially in the Seoul metropolitan area, are rising faster than they did in August last year," Rhee said. 'The policy priority lies in stabilizing market expectations and managing household loans to prevent a rise in housing prices." Rhee further explained that four out of six members of the Monetary Policy Board, excluding himself, left the door open for a possible rate cut within the next three months, while the other two took a more cautious stance. Rhee's own suggestion was not disclosed. Since October, the bank has been alternating between rate cuts and holds, bringing down the policy rate by a cumulative 1 percentage point to support the sluggish economy. "Rhee explained that while financial stability must be prioritized, at the same time, stimulus policies remain necessary due to the low-growth environment," Ahn Ye-ha, an analyst at Kiwoom Securities, said. 'While the rate cut could be delayed until October as the BOK assesses the impact of the real estate policies, the possibility of a rate cut in August remains high, provided the low-growth trend does not change significantly.'
