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South Korea stands out among the few member countries of the Organization for Economic Co-operation and Development (OECD) that continue to impose an estate tax, alongside the United States, Britain, and Denmark. While many nations have opted for inheritance tax systems, South Korea’s estate tax structure has sparked considerable debate.
The OECD highlighted the advantages of a recipient-based inheritance tax in a 2021 report, suggesting that such a system may promote fairness by encouraging the division of estates and reducing wealth concentrations. This perspective reflects a growing recognition of the need for equitable tax policies that distribute wealth more evenly across society.
In 2022, amid concerns over the impact of high inheritance taxes on the capital markets, the administration of former President Yoon Suk Yeol proposed removing the steepest tax rate of 50%. This initiative was aimed at addressing the “Korea discount,” a term used to describe the consistently lower valuations of South Korean firms in the global stock market. Advocates argued that reducing this burden could enhance investment attractiveness and bolster economic growth.
However, the proposal faced backlash from the opposition Democratic Party, which holds a majority in the National Assembly. Their leader, Lee Jae-myung, initially criticized the plan but has recently acknowledged the necessity for certain tax codes to be reformed more rationally, indicating a potential shift towards a compromise solution.
During a recent briefing, a finance ministry official emphasized that the changes announced would encompass only the most essential revisions, with plans for further adjustments still in consideration. The anticipated reforms are slated to take effect in 2028, pending parliamentary approval.
This moment marks a pivotal time for South Korea as it navigates the complexities of its tax policy landscape and seeks to balance fiscal responsibility with economic growth. The government’s forthcoming decisions will undoubtedly be closely watched by both the public and investors alike.
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