Democratic Party of Korea's Lee Hoon-gi: "The Ministry of Economy and Finance's Bill to Prevent Stock-Price Suppression Is a 'Bill of Neglect'"

[Financial News] Lee Hoon-gi, a member of the Democratic Party of Korea's K-Capital Market Special Committee, said the bill to prevent stock-price suppression drafted by the Ministry of Economy and Finance cannot prevent companies from deliberately suppressing their stock prices. He also called for passage of the bill to amend the Inheritance and Gift Tax Act that he sponsored.
Lee held a press conference at the National Assembly Communication Hall on the 30th, urging passage of the bill to prevent stock-price suppression. Representatives of minority shareholders and some institutional investors also attended.
He said, "The stock market has laid much of its foundation through three rounds of amendments to the Commercial Act, but it has also remained unsettled over several issues in recent days. As the market is returning to normal, this is a critical time when we must pass the last remaining bill to prevent stock-price suppression so that our stock market can become more stable and restore confidence."
He continued, "When the Ministry of Economy and Finance announced its tax reform plan on Aug. 3, it included measures to prevent stock-price suppression. However, those measures absolutely cannot prevent stock-price suppression. The Ministry of Economy and Finance's proposal is a 'bill of neglect.'"
The Ministry of Economy and Finance recently proposed identifying companies as long-term low-PBR companies if, during 12 of the most recent 13 half-year periods, or six years out of six years and six months, their industry-specific price-to-book ratios fell within the bottom 25% of the KOSPI Composite Index or the bottom 10% of KOSDAQ (Korea Securities Dealers Automated Quotations).
Lee and other members of the Democratic Party of Korea have criticized the proposal, pointing out that companies could avoid being classified as low-PBR companies—and evade the rule through a "loophole"—if they fell outside the criteria in just two of the 13 half-year periods. They said the proposal gives companies room to manage their PBR during only some periods and avoid the rule, rather than continuously increasing their corporate value.
Under the approach devised by Lee and others, shares of listed companies with a PBR below 0.8 would uniformly be valued at 80% of their net asset value, establishing a floor for calculating inheritance and gift taxes. By preventing inheritance and gift tax burdens from being reduced, the approach would fundamentally eliminate the economic incentive to suppress stock prices.
Lee again criticized the Ministry of Economy and Finance for still failing to prepare a revised proposal despite President Lee Jae Myung's directive to fully reconsider the government's proposal.
He urged, "I call on the Ministry of Economy and Finance. It must no longer insist on a bill that has neither logic nor effect. Accept the bill I sponsored."
After the press conference, Lee told reporters that the Ministry of Economy and Finance had not brought a revised proposal to the working-level party-government consultation held on the 29th between the K-Capital Market Special Committee, the Ministry of Economy and Finance, and the Financial Services Commission (FSC).
[email protected] Kim Hyung-gu Reporter