Democrats Push Ahead with Anti-Stock-Price-Suppression Bill Despite Unresolved Disagreements
The Democratic Party of Korea decided at its policy committee meeting on the 10th to pass a revision to the Inheritance and Gift Tax Act — aimed at preventing major shareholders from deliberately depressing their company's stock price to reduce taxes (the so-called anti-stock-price-suppression bill) — during the current regular National Assembly session. Meeting with reporters after the general meeting of lawmakers, House Spokesperson Kim Sung-hoi said, "There was a great deal of discussion within the party about the anti-stock-price-suppression bill," adding, "The consensus was to pass the Inheritance and Gift Tax Act during the regular session, and to gather opinions on the Capital Markets Act and pass it as quickly as possible." Representative Lee Hoon-ki said immediately after the general meeting on the 10th that the goal was to pass the bill through the relevant standing committee within this month and bring it to a plenary vote within the year.
In August, the government proposed a tax reform plan requiring stock prices to be valued at a premium of at least 30 percent when a company's price-to-book ratio (PBR) falls within the bottom 25 percent of its sector on the KOSPI or the bottom 10 percent on the KOSDAQ. Within the party, a separate bill was introduced to apply fair-value accounting — which calculates stock value based on a company's net profit and net assets — when determining the market price of shares in listed companies with a PBR below 0.8. President Lee Jae-myung instructed his aides in August to conduct a full review of the tax reform plan, saying it had failed to preserve the original intent of the reform. At a forum of the Democratic Party's special committee on the K-capital market, a revised version of the Inheritance and Gift Tax Act was floated, targeting companies whose PBR falls in the bottom 25 percent of their sector in at least three of the most recent six half-year periods.
The Democratic Party also agreed to continue discussions on the mandatory tender offer system using the '50 percent plus one share' formula, which the ruling and opposition policy committees have agreed upon. Critics within the party noted that the current bill requires the acquirer to first purchase the incumbent controlling shareholder's stake before conducting a tender offer for the remaining shares, meaning it does not fully protect minority shareholders. Spokesperson Kim said, "We are well aware of the concerns held by market participants," adding, "We will gather opinions again at next week's general meeting."
