President Lee Jae-myung's designation of the "Stock Price Suppression Prevention Act" as a priority legislative agenda has prompted the ruling Democratic Party of Korea to accelerate its push for passage. Rep. Lee So-young, who introduced the bill, emphasized it aims to "address chronic factors behind the Korea Discount through institutional reform."
In an interview with MBC Radio's "Kim Jong-bae's Focus" on the 27th, Rep. Lee stated, "The Stock Price Suppression Prevention Act originated from concerns about the current inheritance tax system, where major shareholders benefit when listed company stock prices are low."
The bill, which proposes amendments to inheritance and gift tax laws, is designed to prevent intentional suppression of listed company stock prices for tax savings purposes. Specifically, companies with a price-to-book ratio (PBR) below 0.8 would have inheritance and gift taxes calculated based on net assets and net income rather than market price, similar to unlisted companies.
Currently, listed companies calculate inheritance and gift taxes based on stock market prices. Rep. Lee explained this creates incentives for holding companies and conglomerates with high founding family ownership stakes to maintain low stock prices by taking passive approaches to dividend increases and share price support policies ahead of succession.
"Under this bill, there would be no tax benefit when stock prices are suppressed below 80% of net asset value, eliminating the incentive for price suppression," Rep. Lee said. "This should improve stock prices for companies with very low PBRs."
The bill also includes provisions to abolish the 20% additional tax rate applied to inheritance of major shareholder stakes. Instead, it aims to raise the effective tax rate to nearly 50% through fair value assessment.
However, opposition from the People Power Party is expected to complicate passage. Rep. Lee noted, "To pass legislation, both the National Assembly's Tax Subcommittee chairman and the Strategy and Finance Committee chairman are PPP members. The PPP opposes this on the grounds that stock price suppression does not exist."
The Democratic Party is considering multiple legislative strategies, including designating the bill as a fast-track item or incorporating it into the government's tax reform package for automatic introduction as a budget-related bill.
"If the bill is included in the government's tax reform package, it would be automatically introduced to the plenary session during budget deliberations, bypassing standing committee review," Rep. Lee said. "The composition of the National Assembly in the second half of the year will also be important."