[Q&A] Ministry of Economy and Finance: "Currently, No Plans to Further Strengthen Comprehensive Real Estate Tax and Capital Gains Tax"

Briefing on the Follow-up Enforcement Decree Amendments after the 2020 Tax Law Revision

Inheritance Tax Improvement Plan Scheduled for Research This Year
No Plan to Raise Diesel Tax Rate for Carbon Neutrality

Im Jae-hyun, Director of the Tax Policy Bureau at the Ministry of Economy and Finance, is announcing the key points at a background briefing on the "2020 Tax Law Amendment Follow-up Enforcement Decree Revision" held on the 5th at the Government Complex Sejong in Sejong City.

[Sejong=Asia Economy Reporter Joo Sang-don] Lim Jae-hyun, Director of the Taxation Office at the Ministry of Economy and Finance, stated on the 5th, "The government is always monitoring the real estate market, but currently, there are no plans to review special comprehensive real estate tax or capital gains tax strengthening measures."

On this day, Director Lim responded to a question about whether the government is considering strengthening real estate taxes such as comprehensive real estate tax and capital gains tax during a pre-briefing held online at the Government Complex Sejong regarding the "2020 Tax Law Amendment Follow-up Enforcement Decree Revision."

Director Lim explained, "At the last regular National Assembly session, the Planning and Finance Committee requested a review of inheritance tax improvement plans as a supplementary opinion, and research is scheduled for this year. Regarding carbon tax and carbon neutrality, there are currently no plans to adjust the transportation energy environment tax or raise the diesel tax rate."

The following are key Q&A between Director Lim and the press corps.

▲Are you considering lowering or restructuring the inheritance tax?

=There are various opinions about lowering the inheritance tax. Some say the inheritance tax is too high, while others believe that considering the current income distribution level and asset inequality in our society, it should be maintained as is, and lowering the inheritance tax rate would be a step backward in tax reform. Therefore, the government believes that lowering the inheritance tax rate is possible only if a broad consensus among the public is established.

▲There are concerns that taxing overseas Contracts for Difference (CFD) through this tax enforcement decree amendment could lead to excessive taxation on derivatives. What is the estimated provisional tax scale?

=CFDs are being used as a means for major shareholders to avoid capital gains tax upon listing. Therefore, from the perspective of tax fairness, they should be taxed like other derivatives. However, I do not think this will negatively affect the derivatives or stock markets. It is currently difficult to estimate the tax scale.

▲Although the tax credit rate for 'Good Landlords' was increased, there are criticisms that the amount of rent reduction exceeds this benefit, so it may not serve as an economic incentive. What is your position on this?

=The purpose of the Good Landlord tax credit system is not for the government to fully compensate landlords for rent reductions. It is intended to provide partial fiscal support to landlords who reduce rent out of goodwill. Therefore, it is difficult to guarantee rent reductions solely through this tax credit, and the government does not expect it to do so.

▲Please explain the targets designated as New Deal Infrastructure in the New Deal Infrastructure Fund and the composition of the New Deal Infrastructure Review Committee.

=We plan to specify these details thoroughly when establishing the enforcement rules. There are the Information and Communications Industry Act and the Green Industry Act, and related content is expected to be included as applicable targets.

▲Virtual assets often experience significant fluctuations in asset value compared to stocks or other assets. Are there any supplementary measures in case the taxation method cannot keep up with asset price changes?

=Basically, virtual assets are subject to income tax. Income tax is not imposed by the government assessing the taxpayer's income, but taxpayers report and pay their annual income themselves. Even if virtual assets fluctuate, taxpayers whose investment income exceeds 2.5 million KRW annually must file a report themselves. The concern that the taxation method cannot keep up seems to be a different issue.

If virtual asset income exceeds 2.5 million KRW annually but the taxpayer fails to file an income tax return, the tax authorities or virtual asset service providers may detect the individual's virtual income later. Since it was not reported, penalties for non-compliance with reporting and payment will be imposed, similar to other income taxes.

▲You decided to maintain the current major shareholder standard for stocks. Is there no plan to abolish the family aggregation rule in the holding amount criteria?

=There was extensive discussion on the major shareholder standard last year. Initially, the plan was to lower the threshold to 300 million KRW, but it was concluded to maintain it at 1 billion KRW and keep the family aggregation rule as is. If the family aggregation rule were abolished while maintaining the 1 billion KRW threshold, it would significantly reduce income tax enforcement, which would run counter to the goal of enhancing tax fairness in income tax enforcement.