Ruling party lawmaker urges full review of government's share-price suppression measures, warns of loopholes

Democratic Party of Korea lawmaker Lee Hoon-ki urged the government Wednesday to conduct a full review of its "share-price suppression prevention" measures included in the 2026 tax reform plan.

Speaking at a press conference at the National Assembly on Wednesday, Lee said the Ministry of Economy and Finance's proposal "falls short of resolving the fundamental problem" and announced he had introduced his own bill — an amendment to the Inheritance and Gift Tax Act — to address the government plan's limitations.

"One of the causes of the chronic undervaluation in our capital markets is a flawed tax structure in which the lower the share price, the lighter the inheritance and gift tax burden on the largest shareholders," Lee said. "We need to change the economic incentives so that raising corporate value also benefits the largest shareholders."

Lee said the government's proposal "actually offers companies a way to avoid being classified as share-price suppression firms."

Under the government plan, a company may be presumed to be suppressing its share price if its price-to-book ratio falls in the bottom 25 percent of its Kospi sector or the bottom 10 percent of the Kosdaq for 12 out of the most recent 13 half-year periods. Lee argued this creates a loophole, as companies could manage their PBR rankings during select periods to escape classification.

Lee also said the government plan lists the issuance of exchangeable bonds — which the Commercial Act prohibits — as one of the presumption criteria, calling it "a requirement that is practically impossible to meet in reality."

He further said the government's criteria fail to accurately reflect a company's actual value, that whether a company qualifies as a share-price suppressor would be left to the National Tax Service's valuation review committee rather than established by law, and that there are no clear statutory exemptions for companies facing financial difficulties.

Lee said his bill "enhances legal clarity and taxpayer predictability." Its core provision sets the floor for inheritance and gift tax valuation at 80 percent of net asset value under tax law, rather than the share price.

The measure is designed to ensure that even if a major shareholder deliberately depresses the share price to reduce their inheritance or gift tax liability, the tax owed does not decrease. Companies in capital impairment or court receivership proceedings, however, would be exempt. The bill also requires valuation to begin with listed subsidiaries and sub-subsidiaries to block indirect share-price suppression through corporate governance structures.

The bill would also abolish the 20 percent premium valuation applied to shares held by the largest shareholder and allow major shareholders to pay inheritance taxes using their own shares.

Meanwhile, fellow Democratic Party lawmaker Lee So-young posted on Facebook on Monday, shortly after the government unveiled its tax reform plan, that the government's proposal "undermines the very idea behind the share-price suppression prevention bill."