VIP Asset Management has called for the swift enactment of the 'Stock Price Stabilization Law,' which aims to eliminate tax incentives that encourage undervalued stock prices during the inheritance and gift processes of major shareholders.
Kim Min-guk, CEO of VIP Asset Management, stated at a discussion held in the National Assembly on the legislative agenda for the Stock Price Stabilization Law to resolve the 'Korea Discount' that, "This bill is not a regulation to artificially inflate stock prices, but a system to correct the misguided incentive that low stock prices lead to tax benefits for major shareholders."
Despite recent gains in the stock market, Kim noted that undervaluation in the domestic market persists. He explained, "Excluding the top five semiconductor companies, the KOSPI index was at 2,787 points as of July 21, and 73% of KOSPI-listed companies, or 586 firms, have a price-to-book ratio (PBR) of less than 1, which has actually increased compared to a year ago."
Kim identified the inheritance and gift tax system as a key reason for this undervaluation. Under the current system, the tax is calculated based on the average stock price four months before and after the valuation date, meaning that lower stock prices reduce the tax burden for major shareholders.
He emphasized, "It is time to end the tragedy where news of a major shareholder's health decline or death becomes a catalyst for rising stock prices."
Kim further argued that actions such as reducing dividends, retaining cash reserves, utilizing treasury stocks, dual listings, conservative earnings management, and passive investor relations fall within the realm of management decisions and are difficult to penalize. He suggested that rather than regulating these actions, it would be more effective to eliminate the benefits derived from maintaining low stock prices.
The Stock Price Stabilization Law proposes that when a major shareholder inherits or gifts listed stocks, if the stock price does not reach 80% of the tax law's net asset value, the valuation will apply the method used for unlisted stocks, setting the net asset value at a minimum of 80%.
Kim noted, "The 80% minimum net asset value rule already applies to unlisted stocks, and applying it to listed stocks would reduce confusion in the system while allowing for fairer valuations."
Additionally, the bill includes the abolition of the 20% premium tax on major shareholders and allows for the payment of taxes in listed stocks.
Kim concluded, "By preventing stock price suppression, we can create a structure where both major shareholders and minority shareholders benefit from increased corporate value, aligning their interests in the same direction."
* This article has been translated by AI.
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