Junggyeonryeon: "Approach Inheritance and Gift Tax from the Perspective of Building a Foundation for Sustainable Corporate Growth"

"Reform to Inheritance Acquisition Tax and Introduce Capital Gains Tax to Replace Inheritance Tax"
Junggyeonryeon Co-hosts the '4th Mid-sized Enterprise Innovation Growth Policy Forum' with the National Assembly and Academic Societies

Choi Jin-sik, Chairman of the Korea Federation of Medium-sized Enterprises, emphasized on the 19th that "the ruling and opposition parties must actively cooperate for the passage of the inheritance and gift tax reform bill, which aims to strengthen the global competitiveness of companies by abolishing the maximum shareholder premium evaluation."

At the '4th Medium-sized Enterprise Innovation Growth Policy Forum' jointly hosted by the National Assembly Planning and Finance Committee Chairman's Office, the Korea Federation of Medium-sized Enterprises, and the Korea Association of Medium-sized Enterprises at the National Assembly Members' Office Building, Chairman Choi stated, "To effectively respond to the ongoing spread of global instability, it is necessary to expand consensus on the urgent need for smooth business succession as the transmission of entrepreneurship, the source of challenge and innovation, and accumulated management know-how."

Welcome speech by Choi Jin-sik, Chairman of the Korea Federation of Medium-sized Enterprises. Provided by the Federation of Medium-sized Enterprises.

He said, "The succession of many medium-sized enterprises whose founders have reached the elderly age of 70 or older is an urgent issue that will determine the survival of the company," adding, "Pursuing only the strengthening of corporate competitiveness under the world's highest inheritance and gift tax rates is neglecting responsibility to both current and future generations."

He further stated, "We must face the cases of excellent medium-sized enterprises sold to private equity (PE) funds due to excessive inheritance and gift tax burdens," and added, "We need to move beyond ideological rhetoric driven by political interests and urgently recognize the value of corporate continuity, which is the foundation of workers' livelihoods and a source of national wealth creation, and make bold institutional improvements."

The forum, held in the third week of November to mark Medium-sized Enterprise Week, was attended by Chairman Choi, Kwon Jong-ho, Chairman of the Korea Association of Medium-sized Enterprises, Song Eon-seok, Chairman of the National Assembly Planning and Finance Committee, Joo Ho-young, Vice Speaker of the National Assembly, Choo Kyung-ho, Floor Leader of the People Power Party, Kim Sang-hoon, Chairman of the People Power Party Policy Committee, Kim Ki-hyun, Member of the People Power Party, Cha Gyu-geun, Member of the Justice Innovation Party, and 16 other members of the National Assembly, along with about 100 representatives from medium-sized enterprises, government, the National Assembly, academia, and related organizations.

Song Eon-seok, Chairman of the National Assembly Planning and Finance Committee, said, "If the survival of companies is threatened due to the world's highest inheritance and gift tax rates, not only the livelihoods of workers but also the accumulated management know-how and technological capabilities over a long period are at great risk of being severed," adding, "From the perspective of ensuring the sustainability and virtuous cycle structure of the national economy, I will deeply consider improving the inheritance and gift tax system in line with global standards as the chairman of the Planning and Finance Committee."

Oh Moon-sung, Chairman of the Korea Tax Policy Association, in his keynote speech titled 'Desirable Directions for Inheritance and Gift Tax Reform,' said, "The current estate tax structure, which applies progressive tax rates to the entire inheritance tax base, including inheritance tax on assets not actually received, must be corrected," and proposed, "In the short term, reforming it into an estate acquisition tax that calculates tax based on the inherited assets acquired by individual heirs, and in the long term, considering replacing inheritance tax by introducing capital gains tax on inherited assets."

Lim Dong-won, Senior Research Fellow at the Korea Economic Research Institute, emphasized, "The ratio of inheritance and gift tax revenue to GDP in Korea is 0.68%, ranking second among OECD member countries and 4.5 times the OECD average (0.15%)," and stressed, "We need to reform the property tax system, which lags behind global competitiveness, through measures such as lowering the top tax rate, abolishing the maximum shareholder premium evaluation, expanding the scope and limits of business succession deductions, and introducing capital gains tax on business succession."

Chairman Choi said, "It is encouraging that discussions on lowering the top tax rate have started for the first time in 25 years since 1999, but the deadlock in discussions between the ruling and opposition parties in the National Assembly shows that a constructive consensus on sustainable corporate growth has not yet been reached," and urged, "Under a clear recognition of the importance of corporate development as a key player in national wealth creation, the government, the National Assembly, and all sectors including companies must pool their wisdom to seek an institutional environment that supports sustainable management."