The presidential candidates pose before their first joint TV debate at broadcaster KBS' studio on Yeouido, Seoul, Feb. 3. From left are Sim Sang-jung of the minor Justice Party, Lee Jae-myung of the ruling Democratic Party of Korea, Yoon Suk-yeol of the main opposition People Power Party and Ahn Cheol-soo of the minor People's Party. Joint Press Corps

By Lee Kyung-min

The government's plan to impose at least 20 percent tax on gains of at least 50 million won ($41,680) from stock trading starting in 2023 is emerging as a key election issue, in the latest of an economic policy becoming politicized due to public sentiment swinging widely.

Whether the plan will undergo a politically motivated revision remains to be seen, as illustrated in the previous failure of a similar taxation effort by the finance ministry to tighten rules over the definition of "large shareholders" to holders of stocks of over 300 million won, down from 1 billion won.

Main opposition presidential contender Yoon Suk-yeol said during a nationally televised debate, Feb. 3, that the plan should be abolished, in a major change of stance from his presidential pledge announced Dec. 27, when he said the plan should proceed as scheduled, whereas only the stock trading tax should be abolished.

Ruling party presidential candidate Lee Jae-myung criticized his conservative counterpart for flip-flopping, stressing the plan is needed to hold "the rich" to account for hefty capital gains in the financial market, where small retail investors almost always lose against the larger overseas and institutional investors.

Currently, a capital gains tax is imposed on gains from stock trading of non-listed firms. It is also imposed for holders of 1 billion won or more worth of a single stock item, 1 percent or more of stocks listed on the benchmark KOSPI or 2 percent or more of stocks listed on the tech-heavy Kosdaq.

Big fish needed?

Yoon said the local stock market needs retail investors with a considerable amount of stocks to revitalize the market for the benefit of smaller retail investors, refuting Lee's claim that abolishing the plan would hurt small investors.

"Small investors want it. The stock market needs a big fish," Yoon said during the televised debate.

The idea was welcomed by the Korea Stockholders' Alliance representing some 50,000 stock investors, most of whom expect the pandemic-induced cheap liquidity that has overheated the real estate market for years would find its way into the equity market.

"If the capital gains tax is abolished, stock investors will be free from the fear of hefty taxation and the capital market will become more vibrant as a result," the group said.

The expectation is based on the so-called trickle-down effect, with many smaller investors hoping for a virtuous chain of gains to be netted by all stockholders. They say high-flying shares lifted by frequent trading of a large number of shares held by wealthy investors would in turn help smaller retail investors.

According to Ministry of Economy and Finance estimates announced in 2020, about 300,000 stock investors, or 5 percent of the total investors, made gains of over 20 million won from stock trading between 2010 and 2018.

The National Assembly Budget Office (NABO) estimates announced last September showed only 90,000 investors, or 2 percent of the total, would be subject to the government's plan, and are expected to shoulder a combined 1.7 trillion won.