Finance ministry officials speak at a press briefing held at the government complex in Sejong on Tuesday. The briefing was embargoed until Wednesday. (Ministry of Economy and Finance)
South Korea’s Finance Ministry said Wednesday that it has no plans to raise taxes on gasoline and diesel this year, despite its vows to go carbon neutral by 2050, and hinted that it will likely maintain the inheritance tax at its current level.
In a briefing on the revised taxation rules previously announced in July, Im Jae-hyun, a senior official at the Ministry of Economy and Finance, said the government “currently has no plans to adjust the transportation-energy-environment tax or raise fuel taxes.”
The official in charge of taxation added that the government is not considering any further increases to the comprehensive real estate holding tax and property transfer tax. Last year, in an effort to cool down the heated housing market, the government raised the property holding tax for the majority of multiple-home owners to a range of 1.2 percent to 6 percent, from the previous 0.6 percent to 3.2 percent range.
The move, however, apparently failed to put a lid on the nation’s soaring housing prices. The average apartment price per 3.3 square meters in the capital has soared 58 percent to 41.6 million won ($37,585) during Moon’s presidency so far, which is 4.5 times the increase tallied for nine years under the preceding two conservative governments, according to recent data from the civic group Citizens’ Coalition for Economic Justice.
Im hinted that the government is likely to maintain the inheritance tax at its current level, despite growing calls to lower it. The maximum tax rate of 50 percent is imposed on inherited stocks valued over 3 billion won, and 20 percent is additionally levied on the largest stakeholder. Heirs can receive a 3 percent deduction for voluntary reporting.
The matter came into the spotlight after Samsung Chairman Lee Kun-hee died in October, leaving his bereaved family responsible for paying a record 11.03 trillion won for Samsung shares.
“The public consensus on the issue is divided. ... The reduction of inheritance tax would require a strong public consensus,” Im explained.
In line with the scheduled implementation of the new capital gains tax, a tax on profit from cryptocurrency investments will be introduced as well. An investor making an annual profit of more than 2.5 million won would have to pay the tax starting from 2022.
In its latest details explaining the revised taxation rules, the government also discussed the tax benefits for businesses tied to Korean New Deal projects and for investors in its publicly traded infrastructure fund, designed to funnel money into businesses supporting the New Deal initiative.
One aspect of the plan involves luring foreign researchers with tax cuts. It plans to expand the list of institutions where foreign researchers are eligible to apply for income tax benefits.
The beneficiaries would receive a 50 percent tax break for five years if they are employed at think tanks affiliated with corporations, universities or the government. A foreign employee of a corporate research team would receive the same benefits if their work focused entirely on research and development.
Foreign researchers working at local materials, parts and equipment manufacturers would receive a 50 percent tax break for two years and a 70 percent tax break for staying a third year.
The basic requirements for the candidates are a bachelor’s degree in science, technology, engineering or mathematics with over five years of career experience in R&D, or a doctorate in the same fields with over two years of R&D experience.
On long-discussed tax benefits for investors in the publicly traded New Deal infrastructure fund, the government would fundamentally levy a separate tax of 9 percent for dividends received from a maximum investment of 200 million won ($184,026). The current tax on dividends from fund investments is 14 percent.
But investors would have to invest over 50 percent of that amount in infrastructure related to the Korean New Deal policy.
Deputy Prime Minister and Finance Minister Hong Nam-ki previously said the latest tax revision plan sought to revitalize the economy amid the economic fallout of COVID-19, to expand tax benefits for those in need and to improve the administrative process for taxpayers.
By Jung Min-kyung (firstname.lastname@example.org)