[News Today] MAJOR INHERITANCE TAX REVISION

[LEAD]
The government has unveiled a tax reform proposal in 25 years, aiming to overhaul the inheritance tax. It plans to lower the highest tax rate and expand deductions, reducing the tax burden. For our first story, we look into the extent of these reductions.


[REPORT]
The highest rate of inheritance tax stands at 50% in South Korea.
The government has announced plans to reduce this rate in a bid to lower tax burden, marking the first such rate adjustment in 25 years since 1999.

Choi Sang-mok / Deputy Prime Minister for Economy
The tax base for inheritance tax assessment will be adjusted after 25 years. The highest inheritance tax rate, which topped the world, will be lowered to 40%.

The 50% rate which applied to inheritance exceeding 3 billion won or some 2.1 million dollars will be scrapped.
Instead, assets valued above 1 billion won, around 724-thousand dollars, will now all be subject to 40% tax.
This change will ease the burden for some 24-hundred people who as of last year inherited wealth valued over 3 billion won.

Tax exemptions or credits, referring to areas excluded from the taxable amount, will also sharply expand.

The tax credit given per child has gone up from 50 million to 500 million won, or some 360-thousand dollars, If this is added to the 200 million won standard deduction plus the spouse exemption, the tax-free bracket increases from the current level.

Koo Jae-yi / President, Korean Assoc. of Certified Public Tax Accountants
A person with a spouse and 2 children inheriting 2.1 billion won doesn't have to pay tax. The taxable bracket has decreased.

According to the government plan, tax payment for a 3 billion won inheritance will go down from 330 million won to just about 84 million, marking a drop of over 200 million won, or some 144,800 dollars.

The larger the inheritance, the bigger the tax saving. A 10 billion won inheritance will see a tax cut of 640 million won and double that amount will see a reduction of 1.6 billion won.

The government also plans to scrap the extra tax slapped on inheritance of stock holdings held by major shareholders such as conglomerate chiefs.

Prof. Ahn Chang-nam / Kangnam University
There's controversy over tax cuts for the rich. Inheritance tax exists to tackle the gap between rich and poor. The gov't could have been considerate of this.

A revision to the comprehensive real estate taxation is not included in the latest tax code.

The government said it needs more time to contemplate on the issue, given worsening fiscal conditions in local provinces. As for the proposed inheritance tax revision, it only comes to fruition after parliament passage of relevant laws.