The “Korea discount” generally refers to the idea that South Korean stocks remain undervalued. This perception is universally shared among both policymakers and investors, but identifying the reasons behind the lower-than-expected stock performances is tricky largely because individuals point to different factors.

In recent weeks, however, there seems to be a consensus about one of the factors that strongly resonate among government officials, ruling party members and some members of the main opposition party: the financial investment income tax, whose implementation is scheduled for January next year.

The new tax scheme has been delayed by two years until 2025, reflecting the lingering reservations of policymakers from rival parties about its potential impact on the domestic stock market and investors in general.

Early this year, President Yoon Suk Yeol pledged to abolish the envisioned tax scheme to ensure the long-term profitability of investors and nurture the local stock market. But Yoon’s commitment has gone nowhere up until now, largely because the Democratic Party of Korea, which dominates the National Assembly, is yet to make a decision on the tax.

But there are now signs that the Democratic Party may shift its stance, with some of its key members openly stressing the need to explore the pros and cons of the new tax scheme in detail.

A closer look at the financial investment income scheme shows that it’s not all that big a threat, after all. People who have capital gains of over 50 million won ($37,000) from stock investments will be subject to a 20 percent tax. Those who make more than 300 million won from the financial investment will be subject to a 25 percent tax.

This may sound as a fresh burden for retail investors, but it can benefit them since the financial investment income tax actually streamlines three separate taxations on stocks, funds and bonds into a single scheme. For instance, if one loses 200 million won in stock investment and earns 100 million won in fund investment, a tax is currently imposed on the 100 million won profit. Under the new tax scheme, however, since the person ends up with a net loss, there will be no tax at all.

President Yoon and the ruling People Power Party seem to be appealing to some 14 million stock investors, a big pool of voters who can affect future elections by getting rid of the forthcoming taxation.

But the number of investors who actually made more than 50 million won in profits from stock investment is only estimated to be around 67,000, a mere 0.9 percent of the country’s stock investors. At issue is that those investors subject to the financial investment income tax are collectively handling some 150 trillion won worth of investments, accounting for roughly 6 percent of the country’s total market capitalization, according to the data from corporate associations and financial companies.

Experts warn that the new tax scheme will prompt those investors to transfer their portfolios to other countries to avoid the tax, which in turn could undercut the performances of the Korean stocks.

On Sunday, People Power Party spokesperson Park Sang-soo slammed the Democratic Party over the new tax scheme. “If the current session of the Nation Assembly fails to delay the implementation of the financial investment income tax, the Korean stock market can confront problems and Korean firms will suffer,” he said, citing the steep fall of the Taiwan’s stock index following the introduction of a similar tax system.

The Democratic Party is still divided over the new tax. One high-ranking member expressed concerns about the tax’s impact on investors, while another member claimed that most retail investors do not need to worry about taxation. The main opposition party is scheduled to hold an open policy debate on the issue on Sept. 24, weighing various options including a delay or adjustment.

Delaying or abolishing a major tax scheme involves a host of critical policy challenges. Either way, the rival parties have to hammer out a conclusion as soon as possible. Protracted disputes will only inject more confusion to the financial market in a way that proves the validity of the Korea discount.