Presidential office mulling reforms to real estate and inheritance taxes

Sung Tae-yoon, director of national policy at the presidential office, speaks in a press briefing at the Yongsan presidential office in central Seoul on May 26. [JOINT PRESS CORPS]

The presidential office said Sunday that it is currently "reviewing various directions" for reforming Korea's comprehensive real estate holding tax and inheritance tax systems.

This comes after Sung Tae-yoon, director of national policy at the presidential office, suggested that a comprehensive real estate holding tax should be abolished and proposed a reduction in inheritance tax rates to a maximum of 30 percent.

Sung said in an interview with public broadcaster KBS on Sunday morning that a comprehensive real estate holding tax should be levied only on owners of highly-priced homes or multiple homes with a very high total value.

The comprehensive real estate holding tax, imposed annually by the central government, applies to individuals who own multiple homes valued at over 900 million won, in addition to local property taxes, or 1.2 billion won for single-home owners. It was introduced in 2005 to stabilize real estate prices and increase tax fairness but has been criticized over the years for running counter to its stated goals.

Sung added that the inheritance tax rate would be sharply reduced to a level comparable to other Organization for Economic Co-operation and Development (OECD) countries.

In Korea, the maximum inheritance tax rate is 50 percent, the second highest rate in the OECD after Japan at 55 percent and far above the OECD average of around 26 percent

Sung added that the "current inheritance tax system poses significant problems in the succession of family businesses due to its high rates." He said many countries "are switching to a capital gains tax system that imposes taxes not at the time of inheritance, but at the time of selling the business and cashing out."

Sung indicated that the comprehensive real estate holding tax should be abolished for the average homeowner and those who own multiple homes with low total value.

When asked if such tax reforms would be inconsistent with the Yoon Suk Yeol administration's fiscal soundness policy, Sung said that the idea was not to target general taxes but focus on comprehensive real estate holding tax and inheritance, which "largely distort economic activity but have little tax revenue effect."

He said he view economic prospects in the year's second half would be "relatively good" if "the overall export recovery continues and prices stabilize."

The presidential office later confirmed in a statement that abolishing the comprehensive real estate holding tax and reducing the highest inheritance tax rate from 50 percent to 30 percent "are among several" measures being considered.

It added that a decision "will be made after July after gathering expert opinions."

The liberal Democratic Party (DP) criticized the presidential office's tax reform proposals later Sunday.

Lim Kwang-hyun, the DP floor leader, said in a statement that the presidential office "speaks of fiscal soundness, but behind the scenes they are causing a serious fiscal crisis by cutting taxes for the rich."

BY SARAH KIM [kim.sarah@joongang.co.kr]