Concerns are growing that South Korea’s stock market rally could lose steam, as the upcoming tax reform package could fall short of expectations for market-friendly measures.

According to industry sources on Wednesday, the tax reform plan set to be announced in August 2025 is expected to include a rollback of the capital gains tax threshold for large shareholders to 1 billion won ($726,500) from the current 5 billion won, as well as an increase in the securities transaction tax rate. These changes are raising concerns that the Kospi, which posted strong gains in June, could stall. The index has already flattened since early July.

The proposed revisions largely focus on increasing the tax burden for high-value investors. Key measures under discussion include scaling back separate taxation on dividend income, reinstating capital gains tax for shareholders holding more than 1 billion won, and applying targeted taxes on shareholders receiving capital reduction distributions. Amid pressure to secure fiscal resources for economic stimulus, the government appears hesitant to offer tax incentives that would disproportionately benefit major shareholders.

Critics argue, however, that such policies could have broader consequences. Expanding dividend tax benefits and promoting higher payout ratios, they say, could also support small investors and foreign funds, helping to address the longstanding undervaluation of Korean equities.

“Policy consistency is critical to sustaining market momentum,” Kim Soo-hyun, head of research at DS Investment & Securities, said. “If that consistency breaks down, both domestic and foreign institutional investors may pull out of the Korean market.”

Meanwhile, expectations for the Korean stock market have risen following a recent amendment to the Commercial Act that expands directors’ fiduciary duties to shareholders. Still, experts caution that merely adding such language to the law is unlikely to bring meaningful change in shareholder value without concrete enforcement or structural reforms.

[ⓒ 매일경제 & mk.co.kr, 무단 전재, 재배포 및 AI학습 이용 금지]