단상斷想

As Jin Sung-joon, former chairman of the Democratic Party of Korea's Policy Committee, moved to strengthen the major shareholder requirements for imposing capital gains tax on listed stock income, disagreements within the party were publicly expressed, showing signs of 'internal strife' igniting within the ruling party. The reason why it is specifically expressed as 'internal strife' is that although this issue is related to policy, its solution is inevitably political, and depending on how you look at it, it may show aspects of a 'factional war'.

The 1 billion won major shareholder threshold determined by former Chairman Jin Sung-joon this time is the lowest threshold set by successive governments. As prices rise and the value of money falls, 1 billion won in the stock market is not a very high threshold compared to past standards. There is a risk that ordinary 'common people' will suddenly become major shareholders.

Of course, the market reaction was negative. Since President Lee Jae-myung declared that he would shift investment from real estate to the stock market, the stock market has enjoyed a tailwind, with the KOSPI stock price rising by more than 20% in two months.

However, when the Ministry of Strategy and Finance officially announced the '2025 Tax Revision Plan' on July 31, which included lowering the major shareholder threshold, the stock market fell by 3.9% in just one day on August 1, the following day. Lowering the major shareholder threshold to KRW 1 billion to drastically expand the scope of taxation is also a problem, but it is also controversial that there are plenty of ways to circumvent the threshold, such as selling at the end of the year and buying back at the beginning of the year to avoid the threshold.

Since the major shareholder standard is December 31st, there is a 'loophole' where they lower their stake only at this time and then raise it again. Naturally, a 'sell-off' is inevitable at the end of the year, and the stock price cannot aim for a stable upward trend and roller coaster instability can be repeated. If 'instability', which the stock market hates most, intervenes, retail investors have no choice but to cry.

Regarding this confusion in stock policy, there is also a criticism in the financial world that "the abolition of the Financial Investment Income Tax (금투세) in the first place has twisted tax equity." The Financial Investment Income Tax is a tax levied on annual profits of 50 million won or more from financial investments such as stocks and funds. It is simple and fair to pay taxes (income tax) when you earn money.

In fact, the United States, Japan, Germany, and the United Kingdom do not have a stock transfer tax in the first place. No one can complain if taxes are levied when investment income occurs, rather than when stocks are bought and sold. Therefore, the rational direction is to eliminate the stock transfer tax and strengthen the income tax, but we are going in the opposite direction, eliminating the income tax and strengthening the transfer tax.

There have been calls for the introduction of a financial investment income tax for several years, but opposition has erupted, saying, "Why should we pay taxes when the stock market is sluggish?" In particular, in this process, 2030 male ant investors, who are 'hostile' to the Democratic Party, have formed a front with a tax bomb frame, saying, 'The government is pouring ashes on investment.' In the end, the politicians, conscious of the 'votes' in the process of going through the general election and the presidential election, gave up on the financial investment income tax.

For this reason, the Yoon Seok-yeol government, under the pretext of ‘investment promotion,’ postponed the introduction of the financial investment income tax (FIT) at the end of 2022, and abolished it altogether the following year. Then, what position did President Jae-myung Lee take in this process? President Lee had previously "principally agreed to the introduction of the FIT." President Lee had emphasized "fair taxation and resolution of asset disparity" since he was a presidential candidate in 2021, and argued that the FIT is a legitimate tax on high-income financial earners. However, he acknowledged the need for a 'sufficient preparation period' and 'supplementary measures' to mitigate market shock.

While President Lee did not explicitly oppose the Yoon Suk-yeol government's push to postpone or abolish the financial investment income tax (금투세) in 2022-2023, he also made ambiguous criticisms, effectively creating an appearance of 'indirectly' supporting the abolition of the 금투세. Some interpret that his silence or reserved attitude towards the sensitive issue of abolishing the 금투세 was a strategic approach of 'hoping for the best while not expecting too much'.

Looking at President Lee's 'ambiguous' stance positively, it can be seen as 'pragmatism,' but there is also criticism that he lacks policy conviction and is too concerned with public opinion. The current issue of the major shareholder threshold is, in fact, related to the issue of 'trust' in President Lee Jae-myung rather than a policy conflict, and it is known that the presidential office is also viewing the matter seriously.

From the time he took office, President Lee has made boosting the stock market the top priority of his administration. President Lee believes that real estate has been 'fossilized' as a means of speculation rather than for residential purposes for too long, causing various social ills in our society. Therefore, in order to change the huge social 'money stream' to the stock market, he is carrying out 'stock driving' by introducing stock market boosting measures such as cracking down on stock price manipulation.

However, this incident, like the controversy over the major shareholder threshold, occurred because President Lee approached economic policy priorities in a dichotomous way, asking "Real estate or the stock market?" In the meantime, individual investors thought of President Lee as a strong 'stock-friendly person,' but when former Chairman Jin Seong-joon took a 'anti-stock market' approach by drastically lowering the tax base, they are attacking him with a 'traitor frame'.

For President Lee, while the economic policy was correctly directed in the big picture, such as diversifying investment, it will be painful that the consistency and principles of reform were damaged by this controversy over the major shareholder threshold. Market distrust leads to political resistance, which can lead to a loss of reform momentum.

In fact, in the political arena, there is almost no view that former Chairman Jin Seong-joon 'dared' to violate President Lee's stock-friendly policy and lowered the major shareholder threshold at will. At the very least, it is believed that President Lee had 'tacitly' or condoned it.

In the meantime, Jin Sung-joon's role within the Democratic Party was a kind of red team. Former Chairman Jin has been acting as the 'last guardian of reform,' immediately voicing his opposition whenever the Democratic Party showed gestures such as trying to reduce the comprehensive real estate tax by yielding to public opinion. While some evaluate this as Jin Sung-joon's conviction, there was also an evaluation that former Chairman Jin plays a kind of 'balancer' role between reform and realism.

There is also the criticism that former Chairman Jin Seong-joon is not a symbol or incarnation of reform, but is putting on an 'act' to show party members that intra-party democracy is working by staging a scene of bickering with the party leadership. In fact, there is an assessment that this recent controversy over the major shareholder threshold is a 'prearranged game' with President Lee Jae-myung.

It can be seen that President Lee, even before taking office, was determined to push ahead with various reforms, but after actually taking office, he realized that the conditions for driving reform were not favorable, and he is facing a 'reality check' where he has to give up or abandon some of his beliefs about reform that he has maintained until now. Therefore, former Chairman Jin Seong-joon took on the responsibility for 'increasing tax revenue' that President Lee wanted.

The issue of the major shareholder threshold is showing signs of igniting an 'internal conflict' in the Democratic Party earlier than expected. This is a serious matter in that it is a prelude to the confusion and conflict of the Lee Jae-myung government's reforms that will come in the future. Factional conflicts and internal strife appear in various ways.

The most representative is the nomination war ahead of the election, but it is common for differences in routes to spread into factional warfare over policies. President Lee has so far firmly grasped the party and rose to the presidency, but the new representative system of Chung Cheong-rae will be recorded as the first case in which 'Myeong-sim' did not work.

Most of the party members supported Representative Chung Chung-rae, and the delegates and lawmakers with strong influence from incumbent lawmakers supported Representative Park Chan-dae, but the result was Representative Chung's overwhelming victory. It is no exaggeration to say that President Lee's grip on the party has already shrunk to about 30%, at least under the Chung Chung-rae leadership.

In this situation, on the 4th, Representative Chung Chung-rae instructed the new Policy Committee Chairman Han Jeong-ae to "prepare Plan A and Plan B by the end of today and report them to the Supreme Council" regarding the strengthening of the major shareholder requirements for imposing capital gains tax on listed income. Representative Chung asked the lawmakers to refrain from making public statements, saying, "We will organize our position in the fastest time possible and inform the public."

This could be Representative Chung's routine 'party affairs' to manage the confusion within the party, but it can also be read as a kind of 'declaration' that the party will take the lead in reform. In this way, the invisible power struggle between the Chung Chung-rae ruling party leadership and the Lee Jae-myung presidential office has already begun.

The reform driver should be controlled by the president, who is the driver, but if the party leader sitting in the passenger seat 'interferes' not only with the direction but also with the speed, it will inevitably go to the mountains. In this process, the clarity of Lee Jae-myung-style reform is wavering. The confusion in stock policy is only the beginning.