Securities Industry 'Separate Taxation on Dividend Income, Need to Promote Long-term Investment by Individual Investors'

[Financial News] To revitalize the capital market, the financial investment industry has pointed out the need to promote long-term investment by individual investors and separate taxation on dividend income.
Deobureo Minjudang held a meeting titled 'Field Policy Listening Tour for Capital Market Revitalization' at the Korea Financial Investment Association in Yeouido, Seoul on the 29th. Present at the meeting were Kim Byeong-wook, Chairman of the Minjudang Financial and Capital Market Committee, Oh Gi-hyeong, Chairman of the Minjudang KOSPI 5000 Era Committee, along with 8 practitioners from domestic securities and asset management companies.
Jeong Ju-hwan, a deputy at NH Investment & Securities, said, "Looking at customers' portfolios, the proportion of US Treasury bonds and stocks is high, and in the case of the domestic stock market, it is thought that it does not generate profits," and "The reasons include low dividend propensity, tax issues, and policy uncertainty, making it difficult to establish as a long-term holding asset."
He continued, "Rather than focusing solely on stock price increases, a government-level vision on why to invest in the domestic stock market is needed," and "It is necessary to introduce systems that encourage long-term investment, such as increasing the contribution limit of the Individual Savings Account (ISA) and providing tax benefits when holding domestic stocks for more than 3 years."
There was also criticism regarding transaction liquidity. It was explained that major shareholders and foreign investors are unable to exit due to negative perceptions, making new investments difficult.
Lee Sang-yun, a deputy director at Korea Investment & Securities, said, "Looking at the trend of the past few years, while protection systems for individual investors have been strengthened, measures to increase transaction liquidity have been lacking," and "Although a negative atmosphere is formed when major shareholders or foreigners sell stocks, sales must occur for new investments to be made."
The need for separate taxation on dividend income (excluding dividend income from comprehensive taxation) was also discussed. Park Young-soo, Vice President of VIP Asset Management, emphasized, "To make dividends circulate in the market, measures to 'clear the path' are necessary," and "Although there are concerns about tax revenue loss, it is right to separate taxation on dividend income."
Park Young-hoon, a team leader at Shin Young Asset Management, said, "The younger generation has a strong tendency to use stock dividends as long-term income, but high tax rates are discouraging this intention," and "Companies should be encouraged to increase their dividend propensity so that investors' income naturally increases, and the Korea Discount (undervaluation of the domestic stock market) can be resolved."
In response, Chairman Kim said, "Dividends are investment profits obtained by taking risks, so they are fundamentally different from risk-free bank interest income," and "It is not fundamentally correct to comprehensively tax them the same way, and they should be treated differently."
There was also an opinion that financial institutions need to gain investors' trust for stock market revitalization. It was pointed out that due to investors' distrust, indirect investment through institutions is not being activated, resulting in an excessively high proportion of individual investors.
Chairman Kim emphasized, "Assets entrusted by investors should be well managed to generate returns above bank interest rates or overall benchmarks, but there are quite a few cases where this is not the case," and "Financial institution employees should gain trust through management techniques, strategic asset allocation, investor empathy culture, and fulfillment of investment explanation obligations."



hippo@fnnews.com Kim Chan-mi Reporter