The Yoon Suk Yeol administration is now seeking to revise laws on property and inheritance taxes as part of efforts to lessen the tax burden on the public and companies, a policy direction that will meet the demands of many taxpayers, but there are concerns as to whether these policies are really needed given measures already taken.
Sung Tae-yoon, director of national policy at the presidential office, appeared on a TV program Sunday where he stressed there was a need to overhaul or abolish the controversial comprehensive real estate holding tax and to lower the maximum rate for the inheritance tax to around 30 percent, down from the current 50 percent.
Sung said the government is considering whether to exempt comprehensive real estate holding tax from all but the owners of a single home of very high value or multiple homes whose combined value is deemed exceptionally high.
“Since the average inheritance tax rate of the Organization for Economic Cooperation and Development countries is estimated at about 26 percent, the government holds the view that a reduction to around 30 percent is needed,” Sung said.
It marked the first time that a government official has offered a specific number for the possible inheritance tax rate cut.
Sung also said the integration of the comprehensive real estate holding tax into the universal property tax and the reconfiguration of the inheritance tax into the inheritance acquisition tax would be studied as long-term policy projects.
The current estate tax system is based on the total amount of assets left by the deceased, while the inheritance acquisition tax reflects the value of the property inherited by each inheritor -- a method that reduces the tax burden.
The government’s move came as the public and companies have long complained about the high tax burden linked to both the comprehensive real estate holding tax and the inheritance tax.
The comprehensive real estate holding tax, introduced in 2005, has been a political hot-button issue. The tax was supposed to affect only a small percentage of the wealthy with high-value property ownership -- or 2 percent suggested by the previous Moon Jae-jin administration. The percentage, however, had surged in line with the rising property prices in the past decades.
The number of those who had to pay comprehensive real estate holding tax was 460,000 in 2018, but it rose steadily to reach 12.8 million in 2022. And the figure plunged back to 480,000 in 2023, as the Yoon administration softened the related property tax system and the official assessment prices of houses slumped. Experts say that this drastic change in the number of those who have to pay the additional “punitive” tax on top of regular property tax illustrates the underlying problem linked to arbitrary or outdated standards for the target taxpayers.
In recent weeks, some of the members of the main opposition Democratic Party of Korea began to talk about overhauling the tax, a sign that might raise the chance in favor of a revision at the National Assembly.
Meanwhile, critics claim that the comprehensive real estate holding tax has already been softened with the narrow taxpayer target introduced by the Yoon administration last year. Local governments also claim the additional property tax should be maintained to help shore up their shaky budgets. And the actual inheritance tax rate, when excluding the superrich whose inheritance value exceeded 50 billion won ($36 million), stood at 28.9 percent in 2022, far lower than the nominal rate -- a level that does not require an additional reduction.
Given the multiple factors and potential side effects, the government must analyze the long-term impact of its new policy on property and inheritance taxes, especially as to whether it can strike a balance between overburdening the public and offering more tax benefits only to the wealthy.
