The ruling and opposition parties are engaged in a power struggle over inheritance tax reform. The People Power Party noted that along with the need for 'reduction of the highest tax rate', the opposition should 'move away from corporate hatred.' The Democratic Party urged for swift handling of tax law amendments related to expanding inheritance tax deduction limits, saying, 'We cannot accept tax cuts for the ultra-wealthy.'
Kim Sang-hoon, Chairperson of the People Power Party's policy committee, pointed out during a meeting that day, 'The Democratic Party's negative perception of corporations was evident in discussions about revising the inheritance tax and gift tax system,' and added, 'they labeled the reduction of the highest inheritance and gift tax rates as a tax cut for the rich.'
He further stated, 'How can we achieve a rise in the KOSPI index and a 34% economic growth rate while depriving entrepreneurs of their will to run businesses and obstructing succession?' He urged Lee Jae-myung, the Democratic Party leader, to 'first get rid of corporate hatred before proclaiming to be an economically-centered party and to cooperate on reasonable reductions of inheritance tax rather than revising the Commercial Act.'
The chairperson added, 'The party leader has been spreading falsehoods by saying that the People Power Party only insists on reducing the highest tax rate.' He emphasized that the People Power Party advocates for not only the reduction of the highest tax rate but also for the expansion of tax credit limits. 'If the reduction of the highest tax rate is not possible, then at least let's expand the tax credit limits,' he said.
The expansion of inheritance tax deduction limits is an area of consensus between the ruling and opposition parties. At the end of last year, the Tax Subcommittee of the National Assembly's Strategy and Finance Committee reached a provisional agreement to raise the spouse deduction limit from the current 500 million won to 1 billion won. As apartment prices in Seoul have risen, there has been a consensus to make inheritance taxes more realistic.
However, opinions are divided regarding the reduction of the highest inheritance tax rate. The ruling party believes that discussions should also include the reduction of the highest inheritance tax rate (from 50% to 40%) and the expansion of business succession deductions to maintain corporate competitiveness. The government included provisions for reducing the highest inheritance tax rate and expanding the child deduction (from the current 50 million won per person to 500 million won), eliminating the 20% premium assessment for major shareholders, and doubling the deduction limits for outstanding corporations in the inheritance and gift tax law amendment submitted last year.
Park Soo-min, spokesperson for the People Power Party, commented to reporters after the meeting, 'Inheritance tax is not a package deal,' and stated, 'I have strongly argued since last year that both (the reduction of the highest tax rate and the expansion of the deduction limits) should be pursued.' He added, 'The issue of deduction limits needs to be addressed quickly for the middle class, and the reduction of the highest inheritance tax rate is a very important item for the succession of corporate management rights, enhancement of corporate value, and the development of the capital market in our country.'
On the other hand, the opposition party holds the view that the inheritance tax law should mainly focus on a comprehensive deduction and expansion of spouse inheritance deductions. They are targeting the middle class, which has faced increased taxation burdens due to rising housing prices. The reduction of the highest tax rate is viewed as effectively a 'tax cut for the wealthy.'
Jin Sung-jun, Chairperson of the Democratic Party's policy committee, stated during a party meeting that day, 'We plan to raise the spouse deduction from 500 million won, set 28 years ago, to 1 billion won and the comprehensive deduction from 500 million won to 800 million won to align with reality. This was pursued by the Democratic Party during the last regular session,' adding, 'It was withdrawn due to the People Power Party's fixation on tax cuts for the ultra-wealthy such as the reduction of the highest tax rate.'
He emphasized, 'The tax cuts that the People Power Party claims, such as the reduction of the highest tax rate and the elimination of major shareholder premiums, are absolutely unacceptable.' He continued, 'While avoiding excessive tax burdens on the middle class and the common people, the positive functions of the inheritance tax, such as wealth redistribution and provision of equal opportunities, must be maintained.'
To the People Power Party, he urged, 'Since you agree to raise the spouse deduction and comprehensive deduction, please abandon party interests and cooperate with the amendment of the inheritance tax law.'
The ruling and opposition parties are expected to begin discussions starting with the 'expansion of inheritance tax deduction limits', which they have formed a consensus on. The People Power Party's stance is that even if they cannot agree on 'the reduction of the highest tax rate' during inheritance tax reform, they can separately discuss expanding deduction limits.
There are also predictions that the ruling and opposition parties may find a compromise point through 'the expansion of corporate inheritance deductions' instead of a reduction of the highest tax rate. Song Eon-seok, a member of the People Power Party and chairperson of the National Assembly's Strategy and Finance Committee, issued a statement the day before saying, 'The comprehensive deduction for inheritance tax, spouse deduction, and expansion of child deductions must be addressed immediately by the committee,' and added, 'Additionally, we should discuss expanding deductions for small but strong companies in regions with declining populations.'