[2021 National Audit] Hong Nam-ki "If Inheritance Acquisition Tax is Introduced, Tax Revenue Will Decrease... Tax Neutrality is Difficult"

National Assembly Planning and Finance Committee National Audit

Deputy Prime Minister for Economy Hong Nam-ki is attending the National Assembly's Public Accounts Committee hearing on the Ministry of Economy and Finance, the Bank of Korea, and others held at the National Assembly on the 21st, responding to questions from lawmakers. Photo by Yoon Dong-joo doso7@

[Sejong=Asia Economy Reporter Son Seon-hee] Hong Nam-ki, Deputy Prime Minister for Economy and Minister of Strategy and Finance, said on the 21st, "If the inheritance acquisition tax is introduced, the inheritance tax will be reduced," adding, "It seems difficult for the government to maintain tax neutrality, and tax revenue is expected to decrease."

Deputy Prime Minister Hong appeared at the National Assembly Planning and Finance Committee's comprehensive audit on the same day and responded to a question from Yong Hye-in, a lawmaker from the Basic Income Party, about the tax revenue effect of inheritance tax reform, saying, "Rather than the impact on tax revenue, it is important to reach a consensus on which inheritance tax system is more appropriate."

Lawmaker Yong pointed out that reforming the inheritance tax from the current estate tax system to the inheritance acquisition tax system while maintaining the same tax rate would result in a negative effect on tax revenue and could lead to a "tax cut for the wealthy." Yong said, "Although the report released by the past Fiscal Reform Special Committee stated the need for 'rationalization of the inheritance tax taxation system,' the report also emphasized that the tax base brackets should be reasonably reformed in a 'tax-neutral' manner." He added, "To maintain tax revenue while changing to the inheritance acquisition tax, measures such as reducing non-taxable deductions and expanding the tax base must be implemented simultaneously." He further criticized, "This statement (on inheritance tax reform) is in the same context as the reduction of comprehensive real estate tax for single-homeowners," and said, "It suggests easing the tax burden on the wealthy due to the rise in real estate values."

In response, Deputy Prime Minister Hong partially agreed, saying, "Inheritance tax reform is not easy to handle because of the issue of 'wealth inheritance,'" but explained, "Most countries in the Organisation for Economic Co-operation and Development (OECD) adopt the inheritance acquisition tax system rather than the estate tax system." He continued, "There have been many calls to tax inheritance according to the 'ability-to-pay principle,' so this is being reviewed this time," adding, "There were similar criticisms in the National Assembly's Planning and Finance Committee last year."