[EXPLAINER] Why Lee ordered rethink of ISA and 'stock price suppression' rules

President Lee Jae Myung has instructed a comprehensive examination of the proposed modifications to individual savings accounts (ISAs) and regulations designed to curb the intentional manipulation of stock prices. This directive emerged four days following the unveiling of the government's tax reform proposal on August 3. The issue lies with the reduction of certain benefits within existing ISA arrangements.

These accounts provide tax advantages on interest and dividend income, attracting numerous retail investors aiming to accumulate wealth. Taxpayers can exempt up to 2 million won ($1,416) of investment income, while income exceeding that amount is taxed separately at a reduced rate of 9.9 percent. The government's plan entails introducing a new "productive finance ISA."

The income from this account would be entirely tax-free, with no limit on contributions, which could reach 20 million won annually and 200 million won throughout a maximum 10-year period. However, this new proposal would diminish the advantages offered by current ISAs. The administration intends to reduce their duration and eliminate the option to convert them into other investment vehicles.