Core Points - The South Korean government, led by President Lee Jae-myung, unexpectedly introduced a comprehensive tax increase plan just two months into his administration, which includes significant reductions in capital gains tax thresholds, increases in securities transaction tax, and a rise in the maximum corporate income tax rate [1][2] - The announcement has sparked strong public opposition, with a petition to withdraw the capital gains tax plan gathering over 120,000 signatures, far exceeding the 50,000 needed to submit the proposal for parliamentary review [1][3] - The tax reform is projected to increase the annual tax burden on households and businesses by 8.2 trillion KRW (approximately 5.9 billion USD) over the next five years, marking the largest increase in recent years [3] Tax Plan Details - The proposal aims to lower the capital gains tax threshold from the current 5 billion KRW to 1 billion KRW (approximately 714,000 USD) [2] - The securities transaction tax rate will rise from 0.15% to 0.2%, and the maximum corporate income tax rate will increase from 24% to 25%, reversing the previous administration's tax cuts [2] - New rules for dividend income tax will impose a 20% tax on dividend income between 20 million and 300 million KRW, with a 35% rate on amounts exceeding 300 million KRW [2] Market Reaction - The tax increase announcement led to a significant drop in the KOSPI index, which fell by 3.9%, marking the largest single-day decline since April [1][2] - Investor confidence has been severely impacted, with market experts expressing disappointment over the sudden nature of the tax proposals, especially during a period of structural reform in the South Korean capital market [2][3] - Concerns have been raised that the higher capital gains tax could lead to long-term undervaluation of the stock market, as major shareholders might sell off stocks at year-end to avoid taxes, potentially destabilizing the market [2][3] Political Implications - The stark contrast between the government's current tax policies and President Lee's campaign promises, which included a goal of pushing the KOSPI index to 5,000 points, has led to a crisis of confidence among investors [4] - The government's need to find funding sources for consumer stimulus policies due to declining tax revenues from economic slowdown has prompted these tax reforms, which may further alienate retail investors and weaken corporate competitiveness [3][4]

Group 1 - Over 120,000 people in South Korea have signed a petition to halt the recently announced capital gains tax increase plan, surpassing the required 50,000 signatures for parliamentary review, testing the ruling party's resolve to push the proposal through [1][3] - The tax increase plan includes significantly lowering the capital gains tax threshold from 5 billion KRW to 1 billion KRW (approximately 714,000 USD), raising the securities transaction tax rate from 0.15% to 0.2%, and increasing the highest corporate income tax rate from 24% to 25%, reversing the previous government's tax cuts [2] - The unexpected tax proposal has severely impacted investor confidence, with the Kospi index experiencing a 3.9% drop, the largest decline since April of this year, as investors express disappointment over the sudden announcement amid ongoing structural reforms in the South Korean capital market [2][3] Group 2 - The tax proposal has faced strong opposition, particularly from retail investors, with over 30,000 signatures against the capital gains tax proposal collected by Friday afternoon, indicating significant discontent within the investor community [3] - Investor and business groups warn that the tax increase could alienate a large and influential retail investor base and potentially weaken the competitiveness of South Korean companies, casting a shadow over the prospects for economic reform [3]

Core Viewpoint - The unexpected tax increase plan introduced by the new South Korean government has led to a significant market downturn, contradicting previous promises to boost the stock market and investor confidence [1][5][7]. Group 1: Tax Increase Details - The tax plan includes a substantial reduction in the capital gains tax threshold from 5 billion KRW to 1 billion KRW (approximately 714,000 USD) [5]. - The securities transaction tax rate will increase from 0.15% to 0.2% [5]. - The corporate income tax rate will rise from 24% to 25%, reversing previous tax cuts [5]. - New rules for dividend income tax will impose a 20% tax on dividends between 20 million and 300 million KRW, and a 35% tax on amounts exceeding 300 million KRW [5]. Group 2: Market Reaction - The announcement led to a sharp decline in the KOSPI index, which fell by as much as 3.8%, with major stocks like Samsung Electronics and SK Hynix leading the drop [1][6]. - The South Korean won also depreciated against the US dollar, falling by 0.6% to a two-month low [1]. - Investor sentiment has been severely impacted, with over 30,000 signatures collected on a petition against the capital gains tax proposal, nearing the threshold for parliamentary review [6]. Group 3: Political and Economic Context - The tax increase is seen as a response to growing fiscal pressures due to slowing economic growth and declining corporate tax revenues [7]. - The government's actions contradict President Yoon Suk-yeol's campaign promise to improve corporate governance and push the KOSPI index to 5,000 points [7]. - Analysts suggest that this move could undermine public support for the government and deter foreign investors who were optimistic about the market due to reform promises [7].