President Yoon Suk Yeol (2nd from left) speaks during a Cabinet meeting held at the presidential office on Tuesday. (Yonhap)

President Yoon Suk Yeol urged Tuesday bipartisan efforts to abolish the planned financial investment income tax and instructed the government to prepare lifting a temporary ban on short selling in March 2025 to shore up the stock market.

During a Cabinet meeting, Yoon addressed the ongoing uncertainty surrounding the implementation of the financial investment income tax, which would impose a 20 percent tax on capital gains exceeding 50 million won ($38,000) from stock investments, or a 25 percent tax on gains over 300 million won.

Initially set for implementation last year, the implementation has been delayed until January 2025.

The ruling People Power Party has pushed for its abolition to stimulate the stock market, while the main opposition Democratic Party is weighing further postponement.

"I hope the ruling and opposition parties collaborate on scrapping the financial investment income tax to remove market instability and further develop the financial market," Yoon said.

"We aim to create a virtuous cycle where companies raise their value, and individual investors enjoy greater profits and opportunities to build assets," he added.

Yoon also welcomed FTSE Russell's decision to include South Korea in the World Government Bond Index (WGBI) in November 2025. He expected the inclusion to draw as much as 75 trillion won of foreign investments, stabilize the interest rate and the won's value, and reduce borrowing costs for the government and companies.

"By being listed in a global bond investment index worth $2.5 trillion, a new channel has opened that will add breadth and depth to our capital markets," he said.

To further stimulate the stock market, Yoon called on relevant agencies to prepare for the lifting of the temporary ban on short selling, set for March 2025, following the promulgation of a revised Capital Market Act during the meeting.

He said the law's implementation would enable the government to monitor illegal short-selling practices through an electronic system and strengthen penalties for unfair trading, expecting to create a level playing field for both individual and institutional investors.

Yoon also committed "corporate value-up" policies to invigorate the capital market by providing incentives for companies that adopt shareholder-friendly policies, such as increasing dividends or executing buyback programs, to resolve the "Korea Discount."

South Korea initially imposed the short-selling ban in November 2023 after allegations of naked short selling were made against several global investment banks. The ban, which was originally set to expire before July 2024, has been extended until March 2025. (Yonhap)