Jo Seyon Director: "Presidential Candidates Should Confidently Include Tax Increase in Their Pledges"

Kim Yu-chan, President of the Korea Institute of Public Finance, is speaking at the "2020 National Tax Administration Forum" held on November 16 last year at the Bankers Hall in Jung-gu, Seoul, on the theme of "The Role and Tasks of National Tax Administration to Expand the Basis of Faithful Tax Payment." / Photo by Moon Ho-nam munonam@

[Sejong=Asia Economy Reporter Moon Chaeseok] Kim Yuchan, President of the Korea Institute of Public Finance, diagnosed on the 24th that "after next year's presidential election, the Korean economy is highly likely to face a situation where tax increases are necessary."

In the lead column of the May issue of 'Fiscal Forum' published that day, President Kim said, "Presidential candidates need to include taxes in their pledges and leave the judgment to the public." He emphasized, "Presidential candidates should no longer treat taxes as an unpopular pledge, and if it has to be done anyway, they should openly and confidently include it in their pledges." He also stated, "Strengthening taxation on assets and asset income is an unavoidable social demand," citing real estate taxation, capital gains tax on stocks, and inheritance and gift taxes as representative areas for discussion.

Regarding real estate taxation in particular, he suggested, "To stabilize the market, the effective tax rate on property holdings should be gradually strengthened," and added, "Increasing the realization rate of official land prices is the most appropriate method." He pointed out, "The current taxation system on real estate capital gains is based on non-taxation according to the transfer price, but in the long term, it is necessary to improve equity by shifting to a method that deducts a certain amount from capital gains as income deduction."

On capital gains from stocks, he argued, "The excessively high basic deduction amount of 50 million won should be gradually lowered in the future." Regarding inheritance and gift taxes, he evaluated, "Due to the large exemption amount for inheritance tax, taxes are not levied except on a few wealthy asset holders," and said, "The effective tax rate of inheritance tax should be increased by reducing the unified exemption, abolishing the financial asset deduction, and abolishing the reported tax credit."

Regarding the Biden administration's corporate tax rate increase in the United States, President Kim analyzed, "From the U.S. perspective, which does not want to weaken the competitiveness of its own companies, it demands a similar policy environment from competing countries worldwide." He pointed out, "The currently discussed global minimum corporate tax rate is about 21%, but the nominal tax rate can be easily avoided through expanded tax expenditures by individual countries, so it is highly likely that regulations including limits on tax expenditures will follow." He then suggested, "Domestically, preparations should be made to reduce tax expenditures, and improvement plans should be prepared for the multiple tax rate structure and investment tax credits in Korea's corporate tax system."

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