President Lee Jae-myung on the 14th ordered a fact-finding review and an overhaul of the system, saying the current tax credit for donations of artworks is being abused as a "backdoor tax saving." Following his public criticism at the cabinet meeting in on the large bakery café sector's "family business inheritance deduction" issue, he said he would undertake a sweeping effort to shore up loopholes in the taxes system.
At the emergency economic review meeting and cabinet meeting that day, Lee asked National Tax Service Commissioner Lim Gwang-hyeon about "backdoor tax saving with artworks." Lee said, "For example, there is a system where you buy an artwork for 100 million won, then a few years later have it appraised at 10 billion won, attach the appraisal report, and donate it to receive a tax reduction and an income deduction," adding, "If you get benefits like this, you end up pocketing billions or hundreds of millions of won, and I hear it is considered a kind of tax-saving method—have you heard of it?"
When Commissioner Lim answered, "It seems like a new scheme. We will assess the situation and respond," Lee said, "It is being (abused) very broadly as an excellent tax-saving method."
In fact, on internet communities and message boards related to personal finance, methods of using high-priced artworks for tax saving through "appraisal laundering" are being shared. The scheme involves obtaining a high appraisal in a planned way, then donating the piece to a particular organization or foundation to receive a deduction.
He also revisited the family business inheritance deduction. Lee said, "Family business inheritance has been a problem for decades, and even construction or parking lot businesses have come to be included (as family businesses), reaching the stage where this has settled in as an inheritance method." He added, "We need to fix the blind spots of the system itself," and said, "The taxes system is so complicated that even tax accountants do not fully understand it. It needs to be streamlined so ordinary people can understand it at a glance."
He also said, "If people resort to tricks and use backdoor or illegal methods to profit, those who work diligently will lose motivation and get angry," adding, "We must fix it not only in a formal way but in a way that aligns with social justice."