The ruling and opposition parties are moving to increase the inheritance tax deduction amount, which has remained the same for 27 years since its enactment in 1997. After Lee Jae-myung, the leader of the Democratic Party of Korea, said on the 18th when his reelection was confirmed, “The inheritance tax lump sum deduction and spouse deduction amount need to be adjusted,” the Democratic Party has also proposed a series of bills to increase the inheritance tax lump sum deduction and spouse deduction amount. As the ruling party and the government are pushing to increase the inheritance tax deduction amount, the Democratic Party is also moving to speed up legislation, raising the possibility that it will be processed at the National Assembly plenary session along with the government budget bill in December of this year, depending on the agreement.
● Both the ruling and opposition parties propose a bill to increase inheritance tax deductions
Lim Kwang-hyun, the Democratic Party’s floor leader and former deputy commissioner of the National Tax Service, announced on the 21st that he plans to propose a revision to the Inheritance Tax and Gift Tax Act to raise the lump-sum inheritance tax deduction from the current 500 million won to 800 million won and the minimum spousal inheritance deduction from the current 500 million won to 1 billion won. Ahn Do-geol, a Democratic Party member and former 2nd Vice Minister of Strategy and Finance, is also preparing a bill to raise the lump-sum deduction and spousal deduction to 750 million won each. The two were appointed as standing vice-chairmen of the Democratic Party’s policy committee on this day. Initially, Democratic Party members of the National Assembly’s Strategy and Finance Committee had expressed their intention to reject the government’s tax law amendment bill containing the increased deduction amount after it was announced, but they came forward to propose a related revision bill immediately after Representative Lee mentioned the need to increase the inheritance tax deduction amount.
A Democratic Party official explained, “There is a consensus to maintain the top tax rate and adjust the deduction amount,” adding, “There are differences of opinion within the party regarding the specific amount, etc., so we will find a direction through discussion.”
In the People Power Party, Rep. Song Eon-seok, chairman of the National Assembly Planning and Finance Committee, proposed a revision to the inheritance tax law late last month. It increases the lump-sum deduction to 1 billion won and the spouse deduction to at least 1 billion won. The ruling party members of the National Assembly Planning and Finance Committee and the party’s Special Committee on Finance and Taxation Reform participated as co-sponsors, making it effectively a party bill. Rep. Park Soo-young, floor leader of the ruling party Planning and Finance Committee, said in a phone call, “The direction of increasing the deduction is the same, but the methods are different, so an agreement between the ruling and opposition parties is possible,” adding, “I think there will be an adjustment in the middle.”
The government also submitted a tax law revision bill to the National Assembly this year to raise the child tax deduction from the current 50 million won to 500 million won. The government, which lowered income tax, corporate tax, and comprehensive real estate tax in the first year of the Yoon Seok-yeol administration, focused on tax benefits for households and export industries last year instead of large-scale reforms, and this year presented an inheritance tax reform bill. The ruling and opposition party and government bills are likely to be designated as supplementary revenue bills as they are directly related to government tax revenues, and in this case, they are expected to be processed together when the government budget bill is passed.
● Ruling and opposition parties: “Inheritance tax even if you only have one apartment in Seoul”
The ruling and opposition parties have proposed a bill to reform the inheritance tax system because they believe that while the inheritance tax deduction amount has remained the same since 1997, the middle-class tax burden has increased as apartment prices in Seoul have risen. The standard price of an 84㎡ apartment in Seoul has risen 5.7-fold from KRW 225 million in 1997 to KRW 1.29 billion in March 2024.
A People Power Party lawmaker who is a member of the Planning and Finance Committee said, “Even if you own just one apartment in Seoul, you have to pay inheritance tax,” and “Since many of the lawmakers in Seoul are from the opposition party, it seems that the Democratic Party also feels burdened to ignore the inheritance tax reform as a ‘tax cut for the rich. ’” In particular, regarding the spousal deduction, which remains at the level of 27 years ago, there was criticism that excessive inheritance tax is being imposed on spouses even though it is property jointly accumulated by a couple.
According to the ruling party’s bill, if a spouse and two children inherit, the inheritance tax will not be levied on up to 2 billion won of the inheritance by applying a lump-sum deduction of 1 billion won to the 1 billion won spousal deduction. Under the Democratic Party’s bill, the inheritance tax will be 0 won for up to 1.8 billion won, and under the government’s bill, up to 1.7 billion won.
Reporter Choi Hye-ryeong [email protected]
Reporter Yoon Myeong-jin [email protected]
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2024-08-22 15:40:43