President Yoon calls for relaxing of 'excessive' inheritance tax
Published: 17 Jan. 2024, 18:51
- JIN MIN-JI
- jin.minji@joongang.co.kr
President Yoon Suk Yeol said that Korea needs to relax its excessive taxes on inheritance and stock gains to fundamentally resolve the so-called Korea discount.
“Minority shareholders profit when share prices rise, but majority shareholders face excessive inheritance tax if they soar excessively,” Yoon said in a policy debate involving the government and members of the public at Korea Exchange in western Seoul on Wednesday. The session doubled as the Financial Services Commission’s policy report to the president.
“It becomes impossible for most listed companies — even those that aren’t conglomerates — for family to succeed the business if the stock price rises. That explains why there are not that many small, yet strong companies in Korea, like in Germany.”
The highest rate of inheritance tax in Korea is 50 percent, with a 20 percent surcharge for the major shareholders of a large company that pass on their holdings. Korea has faced controversy over its high inheritance tax, most recently reignited by the family members of Nexon founder Kim Jung-ju, who sold a 29.3 percent stake in the game maker last year in exchange for 10 trillion won worth of assets after Kim's death.
Yoon said “excessive tax systems” that eventually deter the development of the stock market harm the middle class and ordinary people due to the Korea discount, a reference to the overall underpricing of Korean stocks compared to those of peers outside the country due to weak shareholder returns and geopolitical risks in the region. A rapid jump of stock investors in Korea has brought increased attention to the matter.
“The Korea discount can be fundamentally resolved through the reform of such excessive taxes,” said Yoon.
There are 14 million stock investors in Korea, which has a total population of around 50 million.
Yoon said that the inheritance tax was hindering companies' operations during his presidential run in December 2021. He also said earlier this month that the government would scrap a proposed capital gains tax on stocks, which was scheduled to take effect in 2025. The bill to scrap the tax could be submitted to parliament as early as this month, the Finance Ministry said Wednesday.
Yoon also vowed to expand eligibility for individual savings accounts (ISAs) and raise the limit on the nontaxable amount.
ISAs, which were introduced to Korea in 2016, allow their holders to shield certain amounts of their money from taxes to maximize potential returns.
“The financial investment sector must be vitalized for the country and society to prevent the solidification of classes and to expand social dynamics,” Yoon said. “We need to benchmark the U.S. economy that achieved prosperity by enabling companies to easily finance funds and allowing people to share that fruition through their investment."
BY JIN MIN-JI [jin. minji@joongamg.co.kr]
with the Korea JoongAng Daily
To write comments, please log in to one of the accounts.
Standards Board Policy (0/250자)