Criticism continues over the 'Anti-Stock Suppression Law' included in the government's tax reform plan. The industry is concerned that it will be difficult to distinguish between undervalued companies, stock manipulation cases, and tax avoidance firms. Even within the ruling party, voices are calling for improvements, citing reasons such as the limited number of applicable targets and the existence of loopholes.
According to political sources on the 5th, Lee So-young and Lee Hun-gi (Rep.) of the Democratic Party of Korea have officially raised concerns about the 'Anti-Stock Suppression Law.' Lee So-yeong (Rep.) already introduced a related bill as a lead sponsor last year, while Lee Hun-gi (Rep.) presented an amended version of the government's proposal on this day.
Under current law, when evaluating inherited or gifted shares for inheritance and gift tax purposes, the average market price over two months before and after the transfer is used. This rule was introduced to prevent major shareholders from intentionally suppressing stock prices to reduce their inheritance and gift tax liabilities.
The government's proposal estimates cases of stock suppression as situations where the cumulative PBR (Price-to-Book Ratio) over the past 13 semi-annual periods falls within the bottom 25% for KOSPI or 10% for KOSDAQ by industry. The same applies to companies that have undergone dual listings, issued convertible bonds, or experienced a stock market valuation decline of more than 30% compared to the average over the past three years.
The National Tax Service Evaluation Committee will make the final determination on whether a company meets the estimated criteria. If confirmed as a case of stock suppression, a surcharge of at least 30% will be applied.
Some segments of the market and political circles point out flaws in the government's proposal. According to the Korea Corporate Governance Forum, the number of companies subject to the government's plan is limited to only 84–87 KOSPI firms and 43 KOSDAQ firms, totaling a maximum of 130. In contrast, Lee So-yeong (Rep.) and others have suggested that a PBR below 0.8 should be considered indicative of stock suppression. Under this criterion, the number of target companies would exceed 1,000 as of last October. Another flaw is that if a company manages its stock price for only two out of the 13th semi-annual periods, it could avoid being classified as a stock suppression case.
Lee Hun-gi (Rep.) stated, "The Ministry of Economy and Finance's proposal does not effectively block incentives for stock suppression; instead, it inadvertently suggests ways for companies to avoid being labeled as stock suppressors."
in ECONOMY
