Yi Whan-woo is a Korea Times journalist primarily covering finance. He writes in-depth articles on macroeconomy and financial markets and previously covered sports, politics, diplomacy and inter-Korean affairs, among others. Feel free to contact him at yistory@koreatimes.co.kr.
Parties clash over inheritance tax reforms amid broader debate about economic issues
Legislators of the ruling People Power Party (PPP) take part in the party's discussion on ways to reform inheritance tax rules at the National Assembly in Yeouido, Seoul, June 20. Korea Times file
By Yi Whan-woo
Parties are wrangling over how far the inheritance tax should be lowered, in their latest race to take the initiative on overhauling a string of contentious taxes in a bid to woo the public.
This includes an additional property tax imposed on owners of expensive homes and a capital gains tax on financial investments.
These taxes have become hot-button issues due to their failure to account for inflation's impact on asset values and the sentiment of a large pool of small investors in the stock market.
According to financial and political sources on Thursday, the main opposition Democratic Party of Korea (DPK) plans to reduce taxes by exempting inheritance tax on up to 1.8 billion won ($1.34 million) of wealth inherited by a spouse or children.
The sources said the party is working on final details and is anticipated to submit a related bill by the end of this week.
The exemption criteria of 1.8 billion will be larger than the 1.7 billion won proposed by the government in this year’s tax code reform after consulting with the ruling People Power Party (PPP).
Announced on July 25, the reform measures are focused on improving the outdated tax system, including the inheritance tax that has remained unchanged for 28 years.
On the other hand, the average transaction price of apartments across Korea increased by 1.9 times from January 1997 to July this year, according to data from KB Financial Group’s real estate service unit.
Such a price hike in apartments, the most popular form of housing in the country, resulted in a sharp increase in the number of individuals who are subject to the inheritance tax.
According to the National Tax Service, the number surged by 95.9 percent — from 10,181 to 19,994 — between 2020 and 2023.
“Once regarded as a tax imposed on the rich, it certainly has become a burden for the middle class,” said Shin Yul, a political science professor at Myongji University. “Under the circumstances, successfully lowering the inheritance tax is anticipated to help parties to win public sentiment.”
Hong Ki-yong, a business administration professor at Incheon National University, voiced a similar view.
“Reducing the burden on the inheritance tax is in line with global standards,” he said, pointing out that Korea’s maximum inheritance tax rate of 50 percent stands as the second-highest in the OECD after Japan (55 percent).
The government has proposed to lower the maximum rate to 40 percent from 50 percent concerning the amount of inherited assets that are worth over 3 billion won.
While they are on the same page over the need to revise other disputed taxes, they are at odds over how they should be revised.