Seoul Orders Rethink of ISA Reform After Backlash From Both Parties

South Korea’s government is reworking two of the most contested pieces of its 2026 tax reform package — the overhaul of the Individual Savings Account (ISA) regime and the so-called “stock price suppression prevention” bill — after President Lee Jae Myung ordered a reconsideration of both measures. The finance ministry, which unveiled the tax reform plan in a formal announcement, confirmed on August 11 that it has begun the review and will “actively examine supplementary measures.”

A Presidential Course Correction

The reversal is notable because the president is overriding his own government’s flagship tax package rather than defending it. Lee, who took office in June 2025, directed officials to revisit the ISA provisions and the stock-related measure after criticism that the package worked against the administration’s stated goal of encouraging household participation in capital markets. The ISA is Korea’s main tax-advantaged retail investment vehicle, and changes to its treatment reach a broad base of ordinary savers — which is precisely why the proposed overhaul drew fire well beyond the usual partisan lines.

The government’s response was swift. Officials in Sejong said the review of both the ISA changes and the stock-price suppression bill is already underway, framing it as active supplementation rather than a full withdrawal. That distinction matters: the ministry is signaling it intends to amend the contested provisions while preserving the broader architecture of the reform.

Friendly Fire From the Ruling Party

Pressure for the rethink came in significant part from within the ruling Democratic Party. Lawmakers Lee Un-ju, Lee So-young, and Lee Hun-gi publicly welcomed the president’s decision to revisit the two measures — an endorsement that doubles as confirmation of how uncomfortable parts of the ruling bloc had become with the original draft.

Lee Un-ju had gone further days earlier, on August 7, calling the government’s real estate tax revisions “a serious misstep for housing stability” and warning that the changes would push up jeonse deposits, monthly rents, and sale prices alike, while urging a careful redrafting. Her criticism suggests the internal discomfort extends beyond the ISA question to the property-tax side of the package, an area the government has not yet said it will reopen.

The Opposition Wants More Than a Patch

The conservative People Power Party is treating the partial retreat as vindication rather than resolution. The party denounced the tax package as “punitive tax violence” and demanded that the administration apologize and restart the entire reform from scratch — a maximalist position that goes well beyond the targeted fixes the finance ministry has promised.

That gap defines the political fight ahead. The government wants to amend two provisions and move on; the opposition wants the whole package back on the drawing board; and a faction of ruling-party lawmakers occupies the middle, satisfied by the ISA climbdown but still uneasy about the housing-tax components.

Why It Matters for Investors

For retail investors, the practical question is what a revised ISA regime will look like — the review reopens tax treatment that millions of account holders had priced into their savings decisions. For the equity market, the fate of the stock-price suppression bill bears on how Korea polices behavior by controlling shareholders, an issue tied to the long-running “Korea discount” debate over depressed domestic valuations. A government that came in promising a friendlier capital-market environment has now been forced to prove it against its own tax bill, and the shape of the amended provisions will show how far that commitment runs.

The finance ministry has not set a timetable for the revised proposals, but with the National Assembly needing to pass the tax package before it can take effect for 2026, the window for redrafting is finite.