Calls to revise Korea's world-high inheritance tax rate of up to 60 percent are expected to gain traction, with the number of those subject to the tax soaring nine-fold over the past two decades.

Korea's rate, well over double the Organization for Economic Cooperation and Development (OECD) average of 25 percent, first came to media attention in 2021 when the tax for the bereaved family members of the late Samsung Group Chairman Lee Kun-hee amounted to 12 trillion won ($9.3 billion).

The figure is about triple the 2.8 billion won sought from the heirs of former Apple CEO Steve Jobs in 2011. Lee's widow and three children agreed to pay the total amount in five-year installments through 2026. Their primary method of payment has been and will continue to be through stock loans, a move to limit unwanted changes in the current crossholding structure.

Currently, a tax rate in a range of between 10 percent and 50 percent is imposed in a five-stage system. The minimum is for bequeathed amounts lower than 100 million won and the maximum is for 3 billion won or greater. The maximum tax rate of 60 percent includes 20 percent extra on the largest shareholders of large firms bequeathing stocks to their family members.

About time

The politically divisive issue was first broached by Deputy Prime Minister and Finance Minister Choo Kyung-ho Nov. 10 when he said it was "time that the maximum rate for inheritance tax came under review."

Korea has the highest inheritance tax rate among OECD member nations, 14 of which have no inheritance tax at all. The rate for Japan is 55 percent, followed by France (45 percent) both the U.S. and the U.K. (40 percent) and Germany (30 percent). New Zealand, Canada and Australia have no inheritance tax.

"The OECD inheritance tax averages about 26 percent," he said. "Korea needs a lower figure but it is hard to broach the issue due to its political and social divisiveness."

The comments by the country's top financial policymaker are in line with the global wave of reducing inheritance tax.

According to The Times and The Guardian, U.K Chancellor of the Exchequer Jeremy Hunt is considering reducing the inheritance tax rate to either 30 percent or 20 percent from 40 percent.

To promote family business continuity, Japan in 2009 put in place tax incentives whereby 80 percent of up to two-thirds of stocks bequeathed will be granted a delay period before meeting inheritance tax obligations. The payment of a gift tax would be altogether postponed. The two rules will be applied as long as the successor maintains 80 percent of employment for five years after acquiring the business.

Double taxation

Inheritance tax has double taxation concerns, but the issue rarely receives fair treatment, as sidelined by the public's resistance to the transfer of wealth, according to Lee In-ho, former chair of the Korean Economic Association.

"The bequeathable assets are the sum of wealth augmented for years after paying income tax," he said. "The taxpayer having to pay the government a large amount of tax again just to leave their holdings behind can be wildly unfair to some."

However, just as deep, he added, is the sense of unfairness shared by the vast majority of the public resentful of wealthy families and the guaranteed success passed down without consideration of individual merit or efforts.

"The sense of injustice is likely to persist for the time being, especially in the polarized, harsh economic climate. It will be the job of policymakers and lawmakers to find a common ground to move the thorny decades-long issue along."

More people to pay

A growing number of people are dealing with the tax and the figure is likely to go up, in light of rapidly increasing property values in recent years.

National Tax Service data showed that 15,760 were subject to the inheritance tax last year, more than nine times the 2002 figure of 1,661. A total of 4.5 percent paid the tax, up from 0.69 percent in 2002.

A person without a spouse leaving an apartment worth 1.5 billion won to their children means about 230 million won payable in inheritance tax.

Viable change?

Observers say Korea should revise the current method, which imposes taxes on individuals for the amount acquired, not the sum total.

For example, an estate of 5 billion won divided among five children at a tax rate of 50 percent currently translates to an inheritance tax total of 2.5 billion won, meaning 500 million won payable by each of the five.

But the method can change to impose a 30 percent rate on each of the 1 billion won, ending with 300 million won payable.