The wealthy get wealthier
Park said that wealthy parents have been transferring their riches to children, which only contributes to widening the disparity between the wealthy and the middle- and lower-income households.
“There’s been a lot of problems including the fact that the actual inheritance tax [that these wealthy people] have paid has been extremely low while only 47 percent have paid their taxes,” said Park, whose report was based on data from the National Tax Service. “There should be a change in the system where different rates are applied accordingly to different ages at a rate that the general public could agree on.”
Park said that while the maximum nominal tax rate on inheritances is 50 percent, the actual taxes that have been levied on inheritances have been far below the maximum rate at 20.9 percent. As a result these children with wealthy parents paid a combined 24.3 million won in taxes in the last five years, which Park argues is too low.
The inheritances primarily occurred when the children were middle or high school students.
Since 2011, nearly 12,000 teenagers have inherited 1.5 trillion won of wealth, which translates to 125.7 million won per child. With an average 21.6 percent tax rate, they have paid 315.9 billion won in combined taxes.
But there were younger children who inherited wealth from their parents while they were still in diapers. In the past five years, 2,207 children younger than two received 196.9 billion won from their parents and paid 34.6 billion won in taxes with a 17.5 percent average tax rate.
More than 3,100 preschoolers accumulated 323.9 billion won worth of wealth while paying 63.7 billion won in inheritance taxes with a tax rate of 19.6 percent.
Among the biggest fortunes that these children received was financial assets, which includes bank deposits. Financial assets that were inherited between 2011 and 2015 amounted to 1.12 trillion won, about 37 percent of inheritances. Real estate followed with 984.7 billion won or 32.3 percent of inheritances and stocks with 760.7 billion won or 25 percent.
The younger the children were, the more likely they were to receive cash assets. Meanwhile, older children saw their real estate inheritances grow.
“It is the government’s responsibility to create a country where we pass on the skills of making it on one’s own to our children instead of creating a country where children only learn to inherit wealth from their parents,” Park said.
BY LEE HO-JEONG [email@example.com]
with the Korea JoongAng Daily
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