The Democratic Party of Korea held a discussion on the 14th, urging the passage of a bill to alleviate inheritance tax burdens tailored to the middle class who own "one dwelling." The aim is to prevent the adverse effects of having to dispose of real estate due to the burden of inheritance tax as housing prices rise.
Rep. Lim Kwang-hyun, who presided over the meeting, held a "Policy Discussion for the Realization of Inheritance Tax Deductions" at the National Assembly Library that day. The main point of the amendment proposed by Rep. Lim is to raise the total inheritance tax deduction from the current 500 million won to 800 million won, and to increase the minimum spouse inheritance deduction amount from the current 500 million won to 1 billion won. The proposed amendment is currently under review by the finance subcommittee of the Planning and Finance Committee.
Attending the discussion that day were Democratic Party members Kim Young-hwan, Kim Tae-nyeon, Park Hong-geun, Lee Byeong-jin, and Hwang Myeong-seon, as well as opposition party member Cha Kyu-geun.
Additionally, experts participating included Professor Kim Hyun-dong from Pyeongtaek University's Department of Business Administration, Professor Park Gi-baek from the University of Seoul's Department of Taxation, Vice Chairman Kim Seon-myeong from the Korean Tax Association, Director Shin Seung-geun from the People's Solidarity for Participatory Democracy's Center for Tax and Fiscal Reform, Researcher Chae Eun-dong from the Democratic Research Institute, and Researcher Lim Jae-beom from the National Assembly Research Service.
◇Opposition: "Raise the inheritance tax exemption limit from 1 billion to 1.8 billion won," ruling party: "We must also lower the highest tax rate."
Currently, inheritance taxes are exempted only up to 1 billion won (where 500 million won is the total deduction and 500 million won is the spouse deduction). However, as the average apartment price in Seoul surpasses 1 billion won, there have been calls from both ruling and opposition parties to reform the inheritance tax deduction system. The current exemption amount has remained unchanged since 1996.
The Democratic Party leadership stressed that inheritance taxes targeting the middle class must be realized. Party leader Lee Jae-myung noted in his speech at the discussion, "Some middle-class individuals express concerns over the inheritance tax burden from owning a single dwelling. Thus, suggestions have emerged to adjust the inheritance tax in accordance with the rising housing prices and changed circumstances," adding that "We must seek reasonable solutions."
Floor leader Park Chan-dae said, "The existing perception that inheritance taxes are only paid by the wealthy is no longer aligned with reality." He argued that there needs to be a reasonable amendment to the inheritance tax law to address unreasonable situations where individuals are forced to sell their homes due to inheritance tax burdens.
Rep. Lim emphasized the need to expand spouse deductions. He stated, "Spouse deductions should be viewed not as a transfer of wealth to children but as a 'horizontal migration' and acknowledge the significant contributions of female spouses in wealth accumulation, and since they will be subject to inheritance tax upon death, this should be seen as tax deferral."
There is no significant difference in opinion between the ruling and opposition parties regarding raising the inheritance tax exemption limit. However, the opposition insists that legislation should focus on the total inheritance deduction and spouse inheritance deduction, while the ruling party argues that they should also lower the highest inheritance tax rate (from 50% to 40%).
◇Experts suggest changing estate tax to estate acquisition tax, differing opinions on child deductions.
Most experts attending the discussion argued that the estate tax should be changed to estate acquisition tax (or estate income tax).
The current inheritance tax system applies a 'estate tax' which imposes taxes on the entire inheritance before it is distributed to heirs. The current tax brackets for inheritance tax are as follows: ▲10% for inheritances below 100 million won, ▲20% for inheritances between 100 million won and 500 million won, ▲30% for inheritances between 500 million won and 1 billion won, ▲40% for inheritances between 1 billion won and 3 billion won, and ▲50% for inheritances above 3 billion won.
The government and National Assembly are reviewing a system to convert the estate tax to estate acquisition tax (or estate income tax). This would allow taxes to be imposed individually after heirs have divided the inherited assets, potentially easing the burden of the inheritance tax.
In contrast, regarding the Ministry of Strategy and Finance's proposal to raise the child deduction from 50 million won to 500 million won, opinions among experts were divided. The Ministry suggested raising the current child deduction amount from 50 million won to 500 million won last year.
Professor Kim Hyun-dong stated, "Raising the child deduction to 500 million won could raise issues of fairness," noting, "In the case of an 1.8 billion won APT., whether there is one child or three, the current deduction system results in the same inheritance tax burden; however, if the deduction amount is increased, the burden of inheritance tax could sharply expand based on the number of children."
On the other hand, Professor Park Gi-baek of the University of Seoul argued, "The issue of changing inheritance tax based on the number of children for heirs could be resolved with a '5 million won deduction per child' approach, asserting that this method would be preferable from the government's standpoint of encouraging larger families."