Today, I want to talk about a controversial tax that I might have to deal with starting January 1st next year: the financial investment income tax. In fact, I debated whether to cover this topic. I've already written the content, but since it's such a politically charged issue, it feels risky to discuss it, especially if it gets repealed in just a day. News is constantly changing on this matter. Many of you who have been following our channel since last year might know that I originally worked as a full-time investor. I completely stopped trading stocks, and if I still weren't involved, I could view the situation more objectively. However, no matter how objective one tries to be, it's not easy when personal circumstances come into play. That said, since I used to trade stocks, I think I can explain well why people have a negative perception of the financial investment income tax. So, what exactly is this tax for?

Why are we contemplating whether to implement it after creating it? Before discussing the financial investment tax, let's understand a few essential points. First of all, what exactly is financial investment income? It refers to the income generated from investing in financial investment products like stocks, bonds, funds, and derivatives, which carry the risk of principal loss, through transfers or redemptions. However, it does not include interest income or dividend income from financial investments. As the name suggests, the financial investment tax is a tax imposed on income generated from financial investment products. Some may wonder if there are already similar taxes in place. Yes, that's correct. In fact, the financial investment tax is not entirely new. It also serves to integrate and streamline the existing tax system for various financial products. For instance, in the case of the existing capital gains tax on stocks, it applies when a profit is realized from selling stocks.

Tax is imposed not on everyone but on individual stock holdings. In the securities market, if the ownership ratio exceeds 1%, and in the KOSDAQ market, if it exceeds 2%, individuals holding more than 5 billion won in a single stock are classified as major shareholders and are subject to capital gains tax. However, this system also applies to general individual investors, not just major shareholders. Furthermore, the scope has been expanded beyond stock investments to include various financial products such as bonds, funds, and derivatives. The approach involves summing up all profits and losses from these financial products and taxing the excess based on related income. The excess refers to financial investment income from domestically listed stocks and public stock funds that exceeds 50 million won annually, or foreign investments and other financial investment income exceeding 2.5 million won. Since this system does not apply to small-scale investors, some refer to it as a tax on the wealthy in the financial investment sector.

It seems that stock traders have not paid taxes until now, but that is not the case. There is a securities transaction tax. The securities transaction tax is a tax imposed on the transaction itself, regardless of whether there is a loss or a profit; it is simply paid. As of 2023, the tax collected from the transaction tax amounts to 6.666 trillion won. Among this, individual investors account for 4.5 trillion won, while foreign investors account for 969 billion won. If both the securities transaction tax and the financial investment tax are implemented, investors will face an excessive tax burden. Therefore, there is a policy initiative to eliminate the securities transaction tax on the premise of introducing the financial investment tax. One of the original purposes of introducing the financial investment tax is also for fairness. Since last year, countries like the United States, South Korea, Germany, and Japan have had tax systems that impose capital gains tax on stocks and bonds under the name of stock transfer tax, but in South Korea, the stock transfer tax only applies to major shareholders.

There was a mention that equity is skewed. It was argued that since taxes are imposed on income from businesses and other sources regardless of their nature, there is no reason for only financial investment income to be subject to taxation. This thought immediately led to the idea of transaction taxes. I will discuss this further later. For reference, when investment losses exceed profits, it is said that a financial investment deficit occurs, and there is a system of carryforward deductions that allows these deficits to be deducted from future income. Additionally, there has been news about a package of legislative measures aimed at securing financial investment companies, which includes provisions that allow direct investment in overseas stocks through ISA accounts, raising the annual contribution limit for ISAs to 30 million won, and applying tax exemption to the entire amount of profits. The tax exemption threshold for financial investments is also set to be raised to 100 million won, assuming these measures are passed. In fact, the details of the matters I am discussing right now may be revised as soon as tomorrow.

I will provide the relevant part. In fact, the details of the financial investment tax have been continuously adjusted, and it was not implemented as scheduled in 2023. Given the current atmosphere, it seems more likely that there will be modifications and improvements rather than complete abolition. The reason there is still much discussion is that the failure to implement it is due to the opposition from individual investors, the financial investment industry, and the political sphere. But why are they opposing it? If we say that it is exempt up to 50 million won, in reality, there aren't many people who make more than 50 million won from stocks in a year. From what has been explained so far, it seems to be a more rational tax system since it reduces transaction taxes and acknowledges losses. It also aligns with the tax principle that there is tax where there is income. In fact, I believe that ultimately eliminating the transaction tax and introducing the financial investment tax is the right approach. However, the question remains whether it is appropriate to implement this content now.

Now, we are getting to the main content of the video. As of 2023, there are 1.46 million shareholders in listed companies. Considering that the population of South Korea is around 50 million, it means that roughly one in three people is involved with financial investments. However, only 1% of these individuals are subject to taxation. This is because only 1% of investors earn more than 50 million won from financial investments. For most, it is fortunate if they do not lose money in the Korean stock market. If we look at it rationally, most people would have a higher chance of paying less tax by introducing financial investment companies and lowering transaction taxes. Nonetheless, entering the stock market means studying, finding, and discovering stocks to trade, ultimately to make money. No one studies stocks with the intention of losing money. Some aim for a life turnaround, while others seek stable retirement savings. Everyone has their own reasons, and they all want what they desire.

the expected value is higher than the amount deducted. If it flows along with one's expectations, one would have to pay much more tax than the current trading tax. In other words, from an individual's perspective, it appears to be a tax increase when looking into the distant future. The issue of taxation is often met with strong resistance unless there is a clear promise of significant reductions. In fact, just from this point, the financial transaction tax does not seem to have any problems. Many advanced markets, like the United States, have already adopted forms similar to financial transaction taxes, and there is a lack of solid grounds for opposing the simple expected value. Even before discussions about financial transaction taxes in the U.S. began, a vast number of people were willing to bear taxes for their investments. The main reason people oppose the financial transaction tax is due to concerns about the Korean stock market, the timing of implementing the financial transaction tax policy, and issues regarding its effectiveness and side effects. The biggest concern is...

The concern is whether the target audience will not stray from the 2% market. To be precise, it means that the vitality of the Korean market itself is diminishing. The fundamental factors that determine the price of investments, whether in stocks or real estate, are supply and demand. When supply and demand decrease, it is natural for prices to fall and vitality to diminish. At first glance, advanced markets like the United States, the United Kingdom, and Germany impose capital gains tax, so what does it matter if we impose it too? Even if you invest in other countries, you still pay taxes, so why would you want to leave the Korean market? However, if you think about it carefully and put it bluntly, if the conditions are the same, where would you choose to invest among the markets of the United States, Japan, and Korea? Would you invest in the Korean market, where shareholder meetings rarely occur and the market fluctuates wildly, or would you prefer to invest in the continuously rising indices that house the world's major corporations, where you wouldn't have to worry about anything?

Are you going to invest in the US market? Just looking at the Japanese index during the same period, it has risen much more than Korea. There is a joke among investors that the Nasdaq is a god. When you compare the charts of KOSPI and Nasdaq, it seems that the saying about Nasdaq being a god is not just a joke. As mentioned, the Nasdaq has continuously risen until now. Investing is not like friends betting on the World Cup; no one invests in the market out of patriotism. However, is it really that difficult to invest in the US market? As I mentioned earlier, even when there were no investment firms, people moved to the US market for liquidity. You can just download an app, put in your money, and with the right mindset, you can invest while lying down in any market. Also, I don’t think the Korean stock market can be considered an advanced market. Korea may be a developed country, but...

Separately, the Korean stock market is classified as an emerging market in the MSCI index. Of course, depending on the classification, it can also be considered a developed market, but ultimately, the Korean stock market receives a similar evaluation to the markets of China, Taiwan, and India. For reference, the Korean market has less shareholder return than China and a lower total market capitalization than Taiwan. It is natural that it is lower than China, and if it were initially classified as a developed market, the Korea discount would not have been mentioned, even excluding the North Korean risk. By the way, China, India, Taiwan, Singapore, Hong Kong, New Zealand, and Thailand all do not have capital gains taxes; they only have transaction taxes. Even with this transaction tax, looking at the current standards, Korea's rates are similar to or higher than those of markets like China and Hong Kong. If this continues, it will not be on the same level as the US market. If capital gains taxes are removed, wouldn't it be the same? However, the removal of transaction taxes means that the rural community special tax of 0.15% remains.

As of 2021, the agricultural special tax is approximately structured, with about 60% of it coming from stock trading. It was introduced with the intention of collecting taxes from the wealthy to support rural areas. Although the name and purpose are different, from the investors' perspective, it is simply a tax. If this is implemented, South Korea will also be paying a transaction tax along with the agricultural special tax. There are many reasons to withdraw from this, including the fact that it separates long-term investors. Isn't this the same in other countries? To prevent this, countries that have implemented a financial investment tax have provided benefits to long-term investors. In the United States, for example, the tax rate decreases based on the investment period. Moreover, if you look closely, there are various tax reductions based on income, and unlike in Korea, there is an indefinite carryover for losses, allowing for various tax strategies. The current bill lacks these aspects significantly.

It is insufficient. If we implement it as it is, the merits of the national director will be greatly diminished. In fact, in the financial investment sector, individual investors are more concerned about domestic funds flowing overseas than about the tax itself. According to the Korea Governance Forum, the number of investment firms subject to financial investment is only about 1% of all investors, yet the amount they invest constitutes a significant portion of the domestic stock market. If the newly imposed tax reduces their actual return on investment by 20%, a substantial amount of money will flow into overseas markets. Professor Oh Moon-seong from Hanyang Women's University, who specializes in tax accounting, also emphasized that currently, domestic stock investments are more favorable in terms of taxes compared to overseas stock investments. However, if we eliminate the 1% tax, domestic investors will perceive investing in U.S. stocks as much safer. Moreover, it is not certain that this 1% will apply only to domestic stocks.

The basic deduction for individual items such as junk bonds and overseas stock futures bonds, as well as derivatives like interest rates and currencies, is 2.5 million won. This might be subject to change. The impact of financial investment is not limited to just the financial investment tax. According to current law, even if a dependent family member has investment income, they can receive a personal deduction of 1.5 million won per person. Financial income such as interest and dividends is also exempt from tax calculations if it does not exceed 20 million won. However, with the introduction of the financial investment tax, any financial investment income exceeding 1 million won will be treated as income, regardless of deductions. If a salaried worker with an annual income of 80 million won lives with a non-working spouse and a college student child with no fixed income, and if the spouse and child earn a total of 1.01 million won in financial investment income over the year, they will have to pay an additional 720,000 won in taxes during year-end settlement. This will need to be confirmed once implemented, but without any separate provisions, it will be treated as income.

If the structure is established, health insurance premiums may also rise. However, the capital gains tax currently in effect for large shareholders does not affect health insurance premiums, so the likelihood is somewhat low. The collection method is also an issue. Except for the designated accounts, withholding tax will be applied. What do you think is the biggest appeal of stocks? Even if you receive compound interest later, if taxes are deducted in advance, the compounding effect is significantly reduced. Moreover, the introduction of equity has sparked controversy; equity is particularly contentious because capital gains tax is now applied to individual investors, which gives foreign and institutional investors relatively favorable conditions. At the same time, there are discussions about tax cuts for the wealthy, as those with money have more ways to minimize taxes compared to individuals. Originally, if profits are made from Fund 3, they would be included in the comprehensive income up to that point.

가세가 되었습니다. 즉, 버는 돈 플러스 투자 소득이 10억이 넘는다면 45% 세금 구간에 해당되었고, 하지만 지금 나온 안에 보면 3호 펀드를 이용하면 금투세 최고 세율인 27.5%만 내면 됩니다. 즉, 세금이 줄어드는 것이죠. 이게 아니더라도 그냥 법인을 세워서 주식을 하면 됩니다. 이미 여의도에서는 거액을 굴리는 고객을 대상으로 법인 설립을 권유하고 있죠. 지금 말한 3호 펀드에 대한 내용은 이번 보안 책에도 내용이 없고요. 그리고 자금이 해외로만 빠져 나갈까요? 주식 시장에서 자금이 빠지게 된다면 필연적으로 이 돈들은 다른 투자처로 분산되어 투자됩니다. 한국에서 투자처로 제일 좋은 게 부동산이죠. 물론 음모론이겠지만 금투세와 부동산을 같이 검색해 보면 부동산 세력이 계획했다는 말까지 나옵니다. 파이터치 연구원에 따르면 주식 양도 1%당 주택 가격이…

The results indicate an increase of about 0.18%. While there are many external factors, I cannot say this with certainty. When I started investing in stocks about nine years ago, there was a lot of talk about the market's volatility. Ultimately, since the U.S. market is the most sought after, many believe that it is appropriate to eliminate transaction taxes and impose taxes on profits compared to the U.S. market. I agree with that perspective. As I mentioned earlier, I believe that, in conclusion, it is indeed a financial investment company. However, I feel that proceeding with the current proposal is problematic, especially at a time when the risk of confusion is increasing and the market itself is at risk of losing vitality. The foundation of financial markets must be trust. If we move towards introducing and modifying policies differently from other policies, we will have already lost trust. Domestic investors have become accustomed to foreign markets, and the vitality has already diminished, pushing the Korean market further down as an investment option.

It might not be the case, as individuals are doing it, and institutions are the same. If the market itself loses vitality, it may not just be 1% that is subject to taxation; it could become a market that incurs 100% losses. In this case, the ones who suffer losses are not just individuals but also companies and the country. Individuals can simply invest in active overseas stocks and be done with it. This concludes our discussion on the controversial tax issue of financial investment income tax for this segment.

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