Hong Nam-ki: "Considering Switching to Inheritance Acquisition Tax, but Being 'Cautious' About Adjusting Tax Rates and Bracket Ranges"

G20 Accompanying Press Corps Washington Meeting

Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, is speaking at a meeting with accompanying reporters on the 14th (local time) at the Fairmont Hotel in Washington D.C., USA. (Photo by Ministry of Economy and Finance)

[Washington D.C. (USA) = Asia Economy Reporter Son Seon-hee] Hong Nam-ki, Deputy Prime Minister and Minister of Economy and Finance, said on the 14th (local time), "We are currently examining the issue of switching to an inheritance acquisition tax based on the heir at the time of inheritance." Amid the government's recent internal review of inheritance tax reform, Deputy Prime Minister Hong expressed a more progressive intention to promote the 'switch to inheritance acquisition tax.' However, regarding adjustments to the inheritance tax rate and taxable income brackets, he drew a line by saying, "There are many opinions that it is inappropriate," and "We are taking a very cautious stance."

Hong, who visited the United States to attend the G20 Finance Ministers and Central Bank Governors Meeting and the International Monetary Fund (IMF), said at a press briefing held at the Fairmont Hotel in Washington D.C. on the same day, "If we switch to an inheritance acquisition tax, the burden of inheritance tax will be reduced."

The current Korean inheritance tax is an estate tax system that taxes the entire property of the heir. Tax rates are applied as follows: 10% for up to 100 million KRW, 20% for over 100 million KRW up to 500 million KRW, 30% for over 500 million KRW up to 1 billion KRW, 40% for over 1 billion KRW up to 3 billion KRW, and 50% for over 3 billion KRW. This taxable standard was revised in 1999, and considering asset value and inflation increases over time, there have been criticisms that the burden is heavy. Especially, as real estate prices have surged recently, increasing the inheritance tax burden even on the middle class, calls to ease this burden have grown louder.

If the current estate tax is changed to an inheritance acquisition tax, only the inherited property from the decedent will be subject to the tax rate from the heir's perspective, allowing for a lower tax rate compared to the estate tax.

Hong explained, "There are opinions that it should be strictly operated to prevent the inheritance of wealth, and opinions that our (Korean inheritance tax system) is relatively strict globally and needs to be eased," adding, "We are reviewing it comprehensively considering feasibility and social acceptance."

He continued, "If the estate tax is changed to an inheritance acquisition tax, it is not simply changing one system but changing the entire paradigm of Korea's inheritance system," adding, "Naturally, this process will also be connected to the consistency issue with the gift tax system."

However, regarding demands for adjustment of the inheritance tax rate, Hong expressed a negative view, saying, "There were many opinions that it is inappropriate to ease the inheritance tax rate itself in a situation where asset inequality has widened too much," and "The government is taking a very cautious stance on adjusting the inheritance tax rate and taxable income brackets." He added, "Since social consensus needs to precede, it is not an issue that can be easily decided," especially concerning inheritance tax rate adjustments.

The government plans to discuss this at the National Assembly's Tax Subcommittee meeting scheduled for early next month once related research results are available. However, considering bipartisan agreement and related procedures, reform within the current administration is practically difficult. This means the inheritance tax reform issue will be passed on to the next administration.

Deputy Prime Minister Hong also said, "At the earliest, it will be at the time of next year's tax reform plan." The Ministry of Economy and Finance, the tax authority, usually announces the tax reform plan every July. If inheritance tax is reformed to an inheritance acquisition tax next year, it is expected to apply from the 2024 inheritance portion.

Meanwhile, regarding recent calls for gas price hikes amid inflation trends, Hong said, "I told the Ministry of Trade, Industry and Energy that while suppressing price increases in the private sector, we cannot raise prices in the public sector, so the gas price must remain frozen." However, he added, "The gas price freeze is until the end of the year, and if there are factors for a price increase, it might be a matter of timing," and "If such demands arise next year and there is no concern about inflation, it can be appropriately reviewed."

Also, amid political calls for the 'organizational separation' of the Ministry of Economy and Finance ahead of next year's presidential election, Hong said, "We are currently fully committed to overcoming the COVID-19 crisis, so there is no room to review or respond to such claims," adding, "The Ministry of Economy and Finance has gone through separation and integration processes in the past, so we do not react too sensitively."

This content was produced with the assistance of AI translation services.