South Korea’s private think tank Korea Economic Research Institute (KERI) under the country’s major business lobby group called on the government to review a reduction in the country’s notoriously high inheritance tax rate at up to 50 percent, the second highest among the members of the Organization of Economic Cooperation and Development (OECD) after Japan.

KERI under the Federation of Korean Industries, which represents several hundred Korean companies including Samsung, Hyundai and LG, on Friday released a report on the nation’s inheritance tax system, demanding revisions in the inheritance tax system.

According to the report, the nation’s proportion of inheritance taxes against gross domestic production (GDP) amounted to 0.5 percent as of 2020, the third-largest among OECD members or 2.5 times larger than the average. Under the current inheritance tax system introduced in 2000, up to a 50-percent tax rate is applied to inherited assets that exceed 3 billion won ($2.32 million). That is the second-largest among OECD members, following Japan at 55 percent. When inheriting stakes from the largest shareholder of a business, another 20-percent tax is levied on the “managerial control premium.”

The nation’s maximum combined tax rate for inheritance and income amounts to 95 percent, again the second-largest after Japan at 100 percent.

“High inheritance tax should be offset by lower income tax or vice versa,” which is not a case in Korea, causing hefty burden on Korean taxpayers, said Im Dong-won, a researcher at KERI.

Of 30 OECD countries, 24 members levy inheritance taxes. Seven countries levy no inheritance tax at all, while the rest levy taxes on capital gains or extra income. Given the situation of other OECD members, KERI suggested lowering the inheritance tax rate to up to 30 percent.

In addition, the Institute proposed that Korea should impose inheritance acquisition taxes instead of inheritance taxes so that each of the family members can be subject to a lower tax rate.

By Pulse

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