President Lee Jae-myung on the 3rd said of a domestic overhaul of the inheritance tax system, "We have not been able to consider, in a big and fundamental way, reforming the inheritance tax itself." Marking the first anniversary of the Dec. 3 martial law incident, Lee presided over a foreign press conference at the Blue House state guesthouse under the title "Democracy newly standing, that one year," and gave this answer to a question asking whether there are plans to reform the inheritance tax to prevent Koreans from emigrating overseas.
Lee said, "The issue of the inheritance tax system is highly contentious, and while there is debate over what would be more effective, there also seems to be a values debate over whether it is truly just," adding, "So it is not easy to speak simply." Lee went on, "There are also unreasonable aspects you (the foreign reporter) mentioned, so it is true that we need to think about them seriously," but also said, "However, at this stage we have not been able to consider fundamentally reforming the inheritance tax itself. We will consider it."
Under the current Inheritance and Gift Tax Act, Korea's top inheritance tax rate is 50% (for a tax base exceeding 3 billion won). If the 20% premium valuation for the largest shareholder is included, the effective top rate is 60%. It is the second highest among member countries of the Organization for Economic Cooperation and Development (OECD). As a result, some asset holders seeking to avoid taxation have left for Singapore, which does not impose inheritance or gift taxes.
The president's remarks came as the National Assembly recently set a tax law amendment centered on "raising the cap on personal deductions for inheritance tax" as a long-term task and put off action for the time being. The Democratic Party of Korea had pledged during the last presidential race to pursue a limited inheritance tax reform aimed at "middle-class households owning a single home." Specifically, it would expand the current 500 million won general deduction and 500 million won spousal deduction to 800 million won and 1 billion won, respectively.
Earlier, at a Sept. 100-day-in-office roundtable, Lee also said the cap on personal deductions for inheritance tax should be raised, saying, "It is too cruel that when a homeowner dies, the remaining family, having no money, must sell the house and leave." However, amid concerns within the government about revenue shortfalls due to stock-related tax benefits and criticism within the ruling party of a "tax cut for the rich," it appears unlikely that the legal changes will gain speed.