South Korea’s main opposition party said Monday it will support the ruling party and government’s decision to abolish capital gains tax on financial investments by retail investors. With this decision, he ended a months-long struggle over the controversial decision.

The news was immediately positive as moments after the announcement, South Korea’s main stock index gained more than 1 percent, while the small-cap Kosdaq jumped almost 3 percent.

Reason for decision

Main opposition leader Lee Jae-myung revealed the reasons for the decision on Monday and said: “The current Korean stock market is in too difficult a situation, and we cannot ignore the position of the 15 million ‘stock investors who invest and rely on them. he. We have therefore decided to accept the abolition demanded by the ruling party and the government.”

Lee, however, said the decision was “regrettable.”

According to a Bloomberg report, South Korea’s Democratic Party, which controls the National Assembly, previously opposed the government’s decision to abandon plans to introduce a levy on retail investors, saying it would favor rich and would weaken government coffers.

But the government’s decision received support from Korea’s influential retail investors, who account for nearly two-thirds of the stock market’s daily turnover. They argued the move would weigh on the confidence of investors, who have lagged this year compared to their Asian peers.

After a delay of about two years, South Korea had planned to introduce a tax of at least 20% from 2025 if the annual capital gains from its stock investments exceed 50 million won.

Those who earn more than 2.5 million won from other financial assets must also pay the tax.

However, in a bid to boost investor confidence as well as the value of stocks, the government decided earlier this year not to impose capital gains tax on retail investors.

Currently, South Korea levies at least 20% capital gains tax for major shareholders who own at least 5 billion won of shares.

With contributions from Bloomberg