The National Assembly will resume discussions on 'inheritance tax reduction' starting with a query session of the Planning and Finance Committee this month. Although the ruling and opposition parties agreed to raise the lump-sum and spousal deduction limits at the end of last year, disagreements on reducing the maximum tax rate led to its rejection two months later. Following the passage of the impeachment motion against President Yoon Suk-yeol, the government's negotiating possibilities have increased, and there is also a psychological expectation for a 'tax cut card' in light of an early presidential election. However, it is necessary to overcome internal opposition within the Democratic Party as the issues are linked to the family business inheritance deduction and the reduction of the maximum tax rate.
According to reports from ChosunBiz on the 5th, the ruling and opposition secretaries of the Finance Committee met the previous day and agreed on a schedule to conduct a query session on the 18th. During this session, inquiries related to tax law amendments aimed at 'reducing the tax burden' are also expected to be made. Prior to this, a tax subcommittee will be held on the 11th to discuss tax laws that were stalled last year, followed by a vote in a plenary session on the 13th.
The key issue is to expand the tax exemption benefits that currently apply only to inheritance assets below 1 billion won (5 million for lump-sum deduction + 5 million for spousal deduction). The Democratic Party has proposed a representative bill by Lim Kwang-hyun for 1.8 billion won (800 million for lump-sum + 1 billion for spousal) while the People Power Party has proposed a bill from Song Eon-seok, chairman of the Finance Committee, for 2 billion won (1 billion for lump-sum + 1 billion for spousal). Last year, a tentative agreement was reached in the tax subcommittee on Lim's proposal. This is because the spousal deduction was recognized as a 'horizontal transfer of wealth.' Unlike intergenerational transfers, it acknowledged the contributions of the surviving spouse to the inherited assets.
The negotiations hinge on expanding the ▲ family business inheritance deduction and ▲ lowering the maximum tax rate. The discussions regarding inheritance tax last year faltered largely due to significant disagreements over the 'reduction of the maximum tax rate.' The amendment proposed by the government at the time aimed to reduce the maximum tax rate from 50% to 40% and raise the child deduction limit from 50 million won to 500 million won per child. This was particularly a demand from the presidential office. The Democratic Party has maintained a position of refusal, labeling it as 'tax cuts for the ultra-wealthy.' They believe that lowering the tax rate itself does not relate to the middle class.
In contrast, the '2025 Economic Policy Direction' released by the Ministry of Finance last month excluded the clause on lowering the maximum inheritance tax rate. Instead, it included the expansion of the family business inheritance deduction for businesses relocating to special opportunity development zones and the conversion of inheritance tax issues to an estate acquisition tax based on the assets inherited by each heir. This indicates a shift in the government's atmosphere regarding the reduction of tax rates. Within the ruling party, there have also been discussions about negotiating with the opposition by presenting alternatives such as expanding the family business inheritance deduction.
A member of the People Power Party from the Finance Committee stated, 'The presidential office strongly demanded the reduction of the maximum tax rate and the abolition of the premium assessment of major shareholder-held stocks, making space for negotiation limited for both the party and the government.' They also noted that 'the maximum tax rate was omitted from this year's government economic policy direction, and considering the economic recession, there may be an intent to explore various negotiations,' adding that they are 'pondering on holding off the reduction of the maximum tax rate.'
Another ruling party member from the Finance Committee shared, on the condition of anonymity, 'Just looking at the average sale price of apartments in Seoul (around 1.2 billion won), the tax burden of inheriting a single house is too high.' They emphasized, 'It is clearly necessary to discuss improving the deduction limits through negotiations with the opposition rather than insisting purely on 'full options' such as lowering the maximum tax rate or expanding the family business inheritance deduction.'
◇ Lee Jae-myung's rightward shift, overcoming internal opposition
The renewed discussions on inheritance tax reduction emerged as Lee Jae-myung, the leader of the Democratic Party, advanced a rightward shift, emphasizing 'pragmatism.' In case of an early presidential election, the aim is to broaden the policy spectrum to secure centrist voter sentiment. Lee was the one who first ignited discussions on inheritance tax. Shortly after successfully reelected as party leader in August last year, he suggested raising the lump-sum and spousal deduction amounts. Although this contradicted the party's existing stance, leading to internal backlash, he swiftly prepared an amendment through Member Lim.
On the 3rd, Lee presided over a discussion on exceptions to the '52-hour workweek.' He asked, 'If workers agree, why can't 'working in a concentrated manner' be acceptable?' He also declared the abandonment of 'local currency' as a premise for preparing a supplementary budget. His first statement at the New Year's press conference was also about 'abolishing basic society.' It came just five months after specifying 'basic society' in the party's platform, as he reconsidered promises and prioritized 'growth' as the primary task. This aligns with the previous actions regarding the abolition of the financial transaction income tax and the deferral of taxation on virtual asset income.
Internal opposition remains strong. There is a significant temperature difference with the Policy Committee, which oversees the party's policies. Some members, including Jeong Seong-jun, chairman of the Policy Committee, have expressed opposition to 'Lee Jae-myung style rightward shift' on issues like the abolition of the financial transaction tax, deferral of taxation on virtual assets, and exceptions to labor hour regulations. A policy committee official commented in a phone call, 'Inheritance tax reduction is a bill that was rejected in the plenary session.' He further remarked, 'It isn't just about raising the lump-sum deduction; it is intertwined with the maximum tax rate and family business inheritance deduction. There is no reason to bring it up for discussion again.'