|Korean business groups often cite the fact that Korea's inheritance tax rate is one of the highest among the OECD member states. Korea Times file|
Country's inheritance tax rate stands at 50%, second-highest among OECD states
By Kim Bo-eun
Korea's inheritance tax rate is drawing attention as business groups have stepped up their calls for the rate to be lowered.
Local business groups often cite the fact that Korea's inheritance tax rate is one of the highest among the OECD member states.
Korea's rate is 50 percent, the second-highest among OECD states, after Japan, which levies 55 percent.
Korea's inheritance tax generated a buzz after the death of Samsung Electronics Chairman Lee Kun-hee, as the bereaved family became subject to 12 trillion won ($9.15 billion) in inheritance taxes.
The rationale for levying inheritance tax is to reduce the wealth gap. Business groups have continued to lobby the government to ease the rate.
"It would not be right to make simple comparisons of rates levied among countries, but the rate levied on large Korean businesses handing down assets worth more than 10 billion won is not a small amount," Kang Sung-hoon, a professor of policy studies at Hanyang University, said.
"A fairer method, however, would be to determine first whether a company holds assets that they can sell to pay the tax, and then subject them to taxation accordingly."
The pro-business Yoon Suk-yeol administration has alleviated the burden for mid-tier businesses, by including them in the pool of firms that are able to get inheritance tax relief. The new standard for applicable firms is generating less than 1 trillion won in annual revenue, up from those who made less than 400 billion won in revenue a year.
Previously, the law allowed the tax cut for smaller companies as a means to help them maintain their businesses, since under substantial tax rates, small businesses often face closure. The grounds for providing such forms of relief are to preserve competent businesses and because companies are able to contribute to the economy by creating jobs.
There were a number of conditions the beneficiaries of the tax cut had to adhere to, such as maintaining their business and retaining 100 percent of their workforce for seven years. These conditions have also been alleviated significantly.