FIIT Abolition Controversy Reignited, 3 Reasons Why Retail Investors Are Strongly Protesting Amidst KOSPI Downturn
The controversy over the FIIT, abolished in 2024, has reignited due to politicians' remarks on tax equity, prompting strong protests from retail investors fearing downward pressure on the stock market.
Key Summary: The controversy over the Financial Investment Income Tax (FIIT), which was legally abolished at the end of 2024, has resurfaced in the second half of 2026. Sparked by politicians' remarks on 'tax equity,' retail investors are strongly protesting, fearing capital flight and downward pressure on the stock market.
Background of the FIIT Controversy Reigniting and Its Impact on the Stock Market
Recently, the fundamental tax principle of "where there is income, there is tax" has been re-emphasized within political circles, leading to endless speculation about the reintroduction of the FIIT or related tax reforms. Critics point out that the current tax structure, centered on the securities transaction tax, is regressive because it imposes taxes even on investors who have incurred losses.
However, the reaction from stock communities and retail investors is overwhelmingly negative. They argue that merely bringing up an already abolished policy increases market uncertainty. Especially when the KOSPI is undergoing significant correction due to synchronization with the weakness of US tech stocks, the controversy over tax reform could accelerate the flight of foreign and institutional capital, amplifying concerns about further downward pressure on the stock market.
Future Policy Direction and Investor Response Strategies
While experts believe the immediate reintroduction of the FIIT is unlikely, they advise paying attention to indirect tax reform movements, such as a potential increase in the securities transaction tax. The government has not yet announced an official stance on reconsideration, but discussions on overall financial taxation could expand in conjunction with the upcoming announcement of additional corporate value-up programs in the second half of the year. Investors should focus on portfolio diversification and risk management in preparation for policy volatility.
FAQ
Q1. When was the FIIT abolished?
The FIIT was officially abolished through a plenary session of the National Assembly in December 2024, and the existing capital gains tax system for stocks is currently maintained.
Q2. Why are retail investors protesting the discussions on reintroducing the FIIT?
They argue that direct taxation on investment returns would decrease the attractiveness of the domestic stock market, triggering massive capital flight, which would ultimately lead to stock price declines and exacerbate losses for retail investors.