Democratic Party of Korea leader Rep. Lee Jae-myung / Yonhap

Rep. Lee Jae-myung, head of the main opposition Democratic Party of Korea (DPK), and the party leadership will determine whether to delay or scrap the planned capital gains tax on stock income, following the party's meeting on Friday.

The much-disputed tax stipulates that effective Jan. 1 next year, a rate of up to 27.5 percent be imposed on income from trading stocks, funds, bonds and financial derivatives exceeding 50 million won ($37,495).

The next presidential hopeful with reclaimed party leadership is highly likely to wrestle between delaying and scrapping the contentious tax, unsettled by the recent characterization of the drive as "Jae-myung tax" by retail investors. Enforcement as planned is all but out of the question.

Further advancing the view is the party's incoherent and incompetent policy direction, as laid bare by a recent botched public hearing in which a DPK lawmaker recommended increased holdings of inverse investments designed to generate profit from the continued underperformance of the Korean equity market.

Also at play is mounting concern among party leaders over the politicization of the issue, highly likely to derail or at least undermine Lee's and, by extension, the party's initiatives at every critical turn in the political sphere in the years to come.

"The party has concluded that it should be Rep. Lee and the leadership who should determine the course of the tax," DPK spokesperson Rep. Noh Jong-myun said.

"All factors, including the date and which of the two options should be embraced, will be deferred to the leadership for discussion. The overall views were mixed, but those calling for enforcement with or without revision were outnumbered by those favoring either delay of scrapping it."

Friday's development followed months of party discord caused by Lee's inconsistent stance on the issue.

In August, he called for a reconsideration of the tax, departing from years of the party platform, which stated, "There should be tax where there is an income."

The sudden change in stance led to a fierce backlash from within the party, prompting him to adopt its enforcement with a revision to raise the maximum deductible to 100 million won from 50 million won.

However, retail investors have since blasted the move, calling it a "Jae-myung tax," a critical stain on the leftist figure whose presidential ambition will falter without the backing of stock investors.

Rep. Kim Young-whan of the main opposition Democratic Party of Korea / Courtesy of Kim Young-whan

Public sentiment took a turn for the worse after the party's Sept. 24 public hearing on the issue highlighted the sheer nonsense and incompetence of the party's supposedly leading minds, the architects of key policy drives.

"If investors' belief is that strong that the KOSPI will slide due to the tax, why don't they invest in inverse products?" Rep. Kim Young-whan said during the hearing.

The comment set off a firestorm among retail investors.

The financial derivative delivers the opposite performance of a specific benchmark index, meaning he essentially encouraged investors to bet on the country's economic stagnation.

"It is nothing short of calling for a betrayal of the country," an investor wrote on an online community.

"How could he even entertain an idea that objectionable that the investors should consider making money at the expense of potential growth of the country?," they added.

The writer drew an analogy to Japanese sympathizers in the early stages of Japan's colonial occupation of Korea, shorting their losses to shift to newer sources of profit.

"The sympathizers netted profits, unlike independence fighters who suffered defending the sinking country. Is this really how the DPK wants its argument and logic to work? Seriously?"

Members of the Korea Stockholders Alliance stage a rally in front of the National Assembly in Yeouido, Seoul, Friday. Yonhap

The likelihood of the tax scrapped is increasing, as indicated by Rep. Jung Sung-ho, a leader of the pro-Lee faction within the party.

He said in an interview with a radio station on Sept. 25 that outright scrapping the tax is a better option, given market volatility.

"I initially favored delaying the tax, but now I think it would be better to scrap it," Jung said.

"Postponing the tax will be insufficient to contain market jitters. It won't be too late to outline the tax from scratch after the party comes to power."

Observers said the comment makes it easier for Lee to abandon the drive altogether amid a fierce crossfire expected among the public, opponents from within the party and the ruling People Power Party (PPP).

PPP leader Han Dong-hoon on Friday urged the DPK to scrap the tax, saying the flip-flopping will not become a source of derision.