ED Wealth exodus risk grows

Activists stage a protest in front of Cheong Wa Dae in this June 2024 file photo, demanding the abolition of "destructive" inheritance taxes. Korea Times file photo

A recent report by the Korea Chamber of Commerce and Industry (KCCI) has sounded the alarm over a growing outflow of wealth linked to inheritance taxes. The report says Korea has the highest effective inheritance tax rate among OECD member countries, prompting wealthy individuals to relocate their legal residence or even change citizenship.

The report suggests that the so-called “wealth flight” is no longer anecdotal but a real and accelerating phenomenon. In 2024, about 1,200 people reportedly left Korea due to inheritance tax burdens, a figure that doubled to roughly 2,400 in 2025.

Under Korea’s current system, people who inherit assets worth 3 billion won ($2.2 million) or more are subject to a base inheritance tax rate of 50 percent. When an inheritance involves a controlling stakes in a company, an additional premium surcharge can push the effective tax rate as high as 60 percent.

The KCCI warned that Korea’s top-tier effective tax rate is a key driver of wealth outflows. The country now ranks among those seeing the largest number of departures linked to inheritance taxes, following the United Kingdom, China and India.

Citing data analyzing the relationship between inheritance tax rates and gross domestic product, the report noted that higher taxes tend to slow economic growth. It added that excessive inheritance taxes can negatively affect investment and employment.

To address these issues, the KCCI put forward a three-point proposal calling for greater flexibility in inheritance tax payments. The recommendations include extending the installment payment period for inherited assets from 10 to 20 years, or introducing a minimum five-year grace period; allowing inheritance taxes to be paid in kind using listed stocks; and extending the stock valuation period from the current two months before and after the base date to a longer span of two to three years.

As outlined in the KCCI report, the current inheritance tax system is unsustainable. It has become increasingly common for business leaders to sell their stakes — or even entire companies — to secure liquidity for tax payments. In May 2019, for example, the Doosan owner family sold nearly 700,000 shares of Doosan Corp. to cover inheritance taxes following the death of honorary Chairman Park Yong-gon.

Such transactions carry serious risks. When companies are sold to foreign private equity firms or international competitors, the risk of technology leaks increases significantly. In such cases, the damage can far exceed the loss of a single billionaire family’s fortune. If the company operates in a strategic industry, a sale can undermine the nation’s global competitiveness.

Ordinary individuals are also bearing the burden of the current system. Those without sufficient liquidity are often forced to borrow from banks or other lenders to pay inheritance taxes, pushing them into debt.

Calls to revise the inheritance tax system have grown louder, yet little progress has been made over the past decade, due largely to government inaction. President Lee Jae Myung has acknowledged that aspects of the current system are unreasonable, but he has signaled his lack of intention to revise them. At a press conference in December, he said his administration was not considering changes to the inheritance tax framework.

Inheritance taxes have become an increasingly important source of government revenue. In 2024, they accounted for 2.14 percent of total tax income, up sharply from just 0.29 percent in 2002. Over the same period, the number of taxpayers subject to inheritance taxes surged from 1,661 to 21,193.

These figures show that the burden no longer falls solely on the superrich. A growing share of middle-class families is now exposed to excessive taxation and its consequences. Given the rapid increase in the number of people affected over the past two decades, even more citizens risk being burdened by the system.

With rising demand for welfare spending and social programs, the government may be tempted to maintain the high effective tax rate. However, the system is not sustainable. As more people are subjected to excessively high inheritance taxes, the risk of economic damage increases. The system’s increasingly dysfunctional impact on the economy is an issue the Lee administration can no longer afford to ignore.