[Op-Ed] Value-Up Begins with Easing Economic Double Taxation

Profits earned by companies should properly accrue to shareholders. However, in Korea, after a company pays corporate tax, shareholders must again bear dividend income tax when they receive dividends. This structure, in which corporate tax and dividend income tax are imposed consecutively on the same corporate profits, has long been pointed to as a burden on both companies and investors. To ease this burden, a separate taxation system has been in effect since this year for dividends paid by high-dividend companies that meet certain requirements.

This system provides tax benefits to shareholders of listed companies that satisfy specified conditions. Eligible companies include those whose dividend payout ratio in the previous fiscal year was at least 40%, or whose payout ratio was at least 25% and whose cash dividends increased by at least 10% from the previous year, among other legal requirements. Shareholders of these companies may choose separate taxation at rates of 14% to 30%, depending on their tax base bracket, even if they would otherwise be subject to comprehensive taxation on financial income.

The direction of this new system, which seeks to reduce the tax burden on dividend income, deserves a positive assessment. When the tax burden is lowered, investors are able to share more fully in corporate performance, which in turn increases the attractiveness of investment. A market in which corporate performance is appropriately returned to shareholders enhances investor confidence and injects vitality into the capital market.

Dividends do more than simply distribute cash. The dividends investors receive are reinvested in other companies or industries, helping funds flow smoothly through the capital market. This can facilitate corporate financing and lead to a virtuous cycle in which capital circulates throughout the market.

For such a flow of capital to function smoothly, an institutional foundation that allows investors to share stably in corporate performance is essential. The OECD likewise emphasizes in the G20/OECD Principles of Corporate Governance that the protection of investor rights and confidence in the market are the foundation of a sound capital market. This perspective highlights the importance of an environment in which investors can appropriately share in corporate performance.

Easing the economic double taxation of corporate tax and dividend income tax is also a way of protecting shareholders’ property rights more reasonably. The successive tax burden imposed as corporate performance is passed on to shareholders can act as a disincentive to investment. Therefore, separate taxation of dividend income can be seen not merely as a tax benefit, but as a meaningful starting point for market-friendly tax reform that supports a virtuous cycle in the capital market.

That said, there is room for improvement in that the scope of the benefit is limited to shareholders of high-dividend companies that meet certain requirements. If easing the tax burden on dividend income helps invigorate the capital market, it would be desirable to expand the system so that more investors, not only those in companies meeting specific criteria, can benefit.

The simpler and more predictable the tax system is, the easier it is for companies and investors to make long-term plans. Conversely, if the scope of application and the standards are excessively complex, market uncertainty will inevitably grow. To realize the intent of the policy, it should evolve in a direction that is easy for anyone to understand and can be applied consistently and stably.

The separate taxation of dividend income from high-dividend companies is a meaningful first step toward revitalizing the capital market. However, value-up tax reform must not remain a temporary special measure for only some companies and shareholders. Economic double taxation should be rationally eased, and the taxation of dividend income should be converted into a more universal and simpler system. Rather than having the government determine the right dividend policy for each company, Korea’s capital market will be able to gain greater trust and vitality when a tax environment is created in which companies and investors can allocate capital autonomously.

Jiwon Shin, Intern Researcher, Center for Free Enterprise (CFE)

---

Original title: [칼럼] 경제적 이중과세 완화에서 시작하는 벨류업

Author: Ji-won Shin

Date: 2026-10-06

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=free_opinion&pn=1&idx=29597