Promoting reorganization for the first time in 24 years
▲ Highest inheritance tax rate in OECD member countries – page 18 Discussions on inheritance tax reform, with conflicting views on ‘strengthening the inheritance of wealth’ and ‘punitive double taxation’, have come to light for the first time in 24 years . Samsung’s family of owners, including Hong Ra-hee, the former director of Leeum, the Samsung Art Museum, recently disposed of shares in related companies worth 2.7 trillion won to raise money for inheritance tax, and President Yoon Seok-yeol added fire through said, “The current inheritance tax is an excessive surcharge.” The need for reform has been constantly raised as the scope of inheritance tax has been widened to include the middle class due to rising asset prices, and the need to cough up more than half of inherited assets is becoming an obstacle to corporate control.
However, as the perception that ‘inheritance tax = tax on the rich’ persists, and that social consensus is important, many believe that it is not clear whether the discussion will gain momentum before the general election. in April.
On the 17th, in response to a question from an economics YouTuber highlighting the ‘Korea Decline’ issue in a debate on people’s livelihood in the financial sector, President Yoon made the inheritance tax issue public by saying, “Only by amending the Korea’s reduction of the excessive tax system that hinders the development of the stock market can be solved.” . As the repercussions grew, Seong Tae-yoon, head of policy at the Presidential Office, said the next day, “I’m not saying we’re going to do anything right away.” Deputy Prime Minister and Minister of Strategy and Finance Choi Sang-mok also said on the 21st, “There is a problem with our country’s high inheritance tax rate, but there is also a point of view that we have to be very careful. “As there are pros and cons, we will proceed with caution,” he said.
The Ministry of Strategy and Finance set up a tax reform advocacy group early last year and has been discussing ways to reduce the burden of inheritance tax. The basic framework is to convert the current ‘heritage tax’ approach, which taxes inherited property, to the ‘heritage acquisition tax’ approach, which taxes inherited property. For example, if four children inherit 10 billion won, taxes must be levied on the 10 billion won and divided between the four, however, in the case of inheritance tax, the burden is reduced because each of the four children being taxed on the 2.5 billion won they inherited.
For the government to be able to proceed with inheritance tax reform in earnest, it must overcome at least ‘three mountains’. The first step is to remove concerns about a drop in tax revenue amid the recent flood of tax reduction policies, such as the abolition of financial investment income taxes. As a result of an analysis carried out by the Budget Office of the National Assembly at the request of Justice Party lawmaker Jang Hye-young, it was analyzed that if the inheritance acquisition tax method is introduced, tax revenue will decrease from 637.9 billion won to 1.2582 trillion won. per year depending on the number of heirs (2 to 4). It has been estimated that if the spouse deduction, which is currently 500 million to 3 billion won, is doubled, tax revenue will decrease by an additional 636.4 billion won. Kim Woo-cheol, professor of taxation at Seoul University, said, “If multiple tax systems are reformed at the same time to reduce tax revenue, a systematic decrease in tax revenue is a concern,” and added, “We need to discuss complementary. measures.”
The consistent logic of government and business circles is that the current system is ‘punitive double taxation’ and is by far the highest among major developed countries. Among the member countries of the Organization for Economic Co-operation and Development (OECD), the highest nominal tax rate is 55% in Japan and 50% in Korea. However, there is a surcharge (20% tax) on large shareholder stocks, so the actual maximum tax rate is 60%. The business community argues that the current inheritance tax is double taxation, saying, “Tax is levied again when property that has been taxed once is passed on to the next generation.” They also say excessive tax rates make it difficult to secure stable shares during the management succession process, leading to damage to corporate competitiveness. President Yoon also said, “Large shareholders will have to pay a huge amount of inheritance tax if the stock price rises too much. “The company has to be sold elsewhere, and the technology is difficult to transfer,” he said.
There is also a counter-argument, when linked to income tax, that our country’s tax burden is at the bottom among OECD member countries. Baek Kyeong-yeop, head of the Tax Analysis Division of the National Assembly’s Budget Office, said, “Among OECD countries that implement income tax and inheritance tax, the country with the highest national burden ratio (payment of income tax and tax inheritance is relative). to gross domestic product (GDP)) was Denmark at 46.9%, and Korea at 29.9% “In percentage terms, it ranks 18th, which is lower than the average of 35.8% for the 22 countries analysed.”
Above all, the view of ‘strengthening the inheritance of wealth’ and ‘lowering taxes for the rich’ is a highly volatile political obstacle that could destroy the inheritance tax reform itself. It is for the same reason that the government set social consensus as a prerequisite. Seokjin Woo, professor of economics at Myongji University, said, “50% of apartment owners in Seoul will have to pay inheritance tax. “It is right to reform to be more lenient on inheritance like developed countries,” he said. “Inheritance tax on estates should be looked at differently. “There is no evidence that the inheritance tax reduces investment or prevents economic growth,” he said.
Reporter Sejong Lee Young-jun
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