Inheritance Tax Reform: Proposals and Concerns

The inheritance tax reform in South Korea is a hotly debated topic due to its impact on middle-class families and tax revenue.

### South Korea's Inheritance Tax Reform Debate
* 🏠  The government is planning to propose a **comprehensive tax reform plan** next month, as discussions about reforming **inheritance tax** have been ongoing.
* 💰  The middle class has seen an increase in tax burden, with the number of taxpayers subject to inheritance tax and the **determined tax amount rising significantly** over the past two years.
* 📈  The ruling party proposes changing the method of determining the tax based on the **inheritance received per individual**, while the opposition party suggests a **slight increase in the standard deduction amount**.
* 🏷️  South Korea currently has the **highest inheritance tax rate** among OECD member countries, and there are concerns about the **fairness and effectiveness** of the current tax system.
* 🔄  Changing the inheritance tax system to an acquisition tax per individual has both advantages and disadvantages, with the main disadvantage being the **high cost of examining each individual's inheritance**.
* 💸  There are concerns that changing the tax system could lead to a **significant reduction in tax revenue**, with a simulation by the National Assembly Budget Office suggesting a potential **maximum revenue loss of about 13 trillion won**.
* 🏭  The business inheritance deduction system, which aims to **support the transfer of small and medium-sized enterprises**, is another key issue in the inheritance tax reform debate.
* 🌏  Inheritance and gift tax systems vary widely among countries, with some countries imposing taxes when inherited property is **disposed of**, rather than when the deceased **passes away**.

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Proposed Reforms for Inheritance Tax in South Korea

The South Korean government is planning a comprehensive tax reform, with a focus on inheritance tax due to the skyrocketing real estate prices, which have led to a significant increase in the number of taxpayers and the tax amount.

The proposed reforms include potentially raising the one-time deduction threshold, adjusting the focus to the amount received per individual in inheritance, and improving the gift tax on stock increases.

There is a growing consensus among tax experts and professionals on the need to calculate the acquisition tax per individual and make these adjustments to the inheritance tax law.

Proposed Changes in Inheritance Tax and Gift Law

The ruling party and the opposition party have differing views on inheritance tax reform, with the former proposing a complete change in the tax determination method and the abolition of the major shareholder surcharge system.

The opposition party, on the other hand, suggests a slight increase in the standard deduction amount and further expansion of tax deductions for small and medium-sized enterprises or family businesses.

The debate on inheritance tax reform is fueled by the increasing number of households paying inheritance tax due to decreased deduction amounts, with the total amount of inheritance tax doubling from 2018 to 2021.

The Complexities of Inheritance Tax and the Challenges of Tracking Assets

Inheritance tax has redistributive and subsidiary effects, but it is costly for the National Tax Service to examine and track individual amounts.

There are challenges in tracking assets that have been dispersed over a long period, especially foreign assets, leading to difficulties in enforcing the tax.

Despite suggestions for reform, the administrative costs and the complexity of tracking assets remain major obstacles in the effectiveness of inheritance tax.

Proposed inheritance tax reforms could lead to a decrease in tax amounts for heirs.

The current method of dividing inheritance among children can sometimes result in higher tax payments.

A simulation analysis shows that dividing the property among four children in a certain range can lead to a significant maximization of tax payments.

Potential Impact of Reforming the Inheritance Tax System

Reforming the inheritance tax system could potentially reduce tax revenue by up to 13 trillion won, raising concerns about fairness, especially regarding taxing inheritance from spouses.

The current system has led to a significant increase in the number of people paying inheritance tax, mainly middle-class families in Seoul and the metropolitan area.

The growing number of tax payers has led to a reevaluation of the system's fairness and its impact on the population.

Proposed Changes to Inheritance Acquisition Tax System

The Democratic Party is hesitant about changing from gift tax to inheritance acquisition tax, citing concerns about tax revenue.

They are also against the ruling party's proposal to increase taxes on inheritance and major shareholders.

The business inheritance deduction system aims to support small and medium-sized enterprises, providing tax reductions based on the management period and conditions for the inheritor.

The Inheritance of Businesses: A Comparison of South Korea and Germany

In Germany, the inheritance of small and medium-sized enterprises is well established, with about 10,000 companies transferring businesses annually, in contrast to South Korea's 200 companies.

The concept of inheriting businesses in South Korea has raised questions about the criteria and emotional responses to wealth and business size.

The practice of inheriting small and medium-sized enterprises is supported as a way to ensure business continuity, with a call for government support, which is widely accepted.

The Varied Landscape of Inheritance Tax Laws

Inheritance tax rates and policies vary widely across countries, causing controversy and confusion.

Some countries impose a high inheritance tax rate, while others have no inheritance tax at all.

In addition to inheritance tax, some Eastern European countries also tax inherited property when it is sold, rather than when it is passed down.

The complex and diverse nature of inheritance tax laws highlights the importance of considering the people's consensus and democratic control in the process of revising tax regulations.