The Individual Capital Repatriation Tax (ICRT) Framework: Leveraging Domestic Brokerages to Channel Global Equity Gains into National Resilience

Abstract

For emerging and middle-power market economies, household capital flight toward foreign equities presents a profoundpolicy dilemma: while global portfolio diversification enhances household wealth, capital outflows strain foreign exchange(FX) reserves and weaken domestic equity valuations. Historically, state interventions have relied on capital controls orpunitive capital gains taxation on foreign assets to contain liquidity. This paper introduces the Individual Capital Repatriation Tax (ICRT) framework—a novel, market-driven policy mechanism designed to align household profit-seeking with national macroeconomic stability. Utilizing the operational infrastructure of domestic brokerages, the ICRT model offers a sliding-scale tax abatement on realized foreign capital gains contingent on three conditions: (1) mandatorycurrency conversion back to the domestic currency, (2) immediate reinvestment into designated domestic productive assets(such as domestic equity indexes, corporate venture funds, or strategic technology ETFs), and (3) a minimum holdingperiod for the reinvested domestic capital. Using South Korea as a primary case study—a jurisdiction marked by severehousehold real estate concentration, an underperforming domestic stock market ("Korea Discount"), and acute FXvulnerability—we formulate a mathematical simulation of the ICRT mechanism. We demonstrate how the ICRT transformsforeign equity gains from a perceived drain on foreign reserves into an organic FX stabilization buffer and a non-dilutiveliquidity channel for domestic industrial innovation.