South Korea has announced a series of proposed tax benefits aimed at bolstering its economy and stock market, amidst challenges posed by an aging population and sluggish consumption.
The proposed tax reforms include lowering the inheritance tax ceiling to 40 percent from 50 percent and eliminating a rule that imposes additional burdens on controlling shareholders.
If approved by the parliament, this adjustment would represent the first reduction in the nation’s inheritance tax rate since 1995, impacting major conglomerates like Samsung Electronics Co. and Hyundai Motor Co.
President Yoon Suk Yeol’s administration has launched the Corporate Value-up initiative, which aims to increase shareholder returns and encourage companies to allocate more funds towards share buybacks and dividends.
The government plans to extend tax breaks for key technology sectors, particularly semiconductors, by three years and postpone taxes on cryptocurrency holdings for an additional two years.
The initiatives align with other financial reforms that extended trading hours for the won, which were implemented as part of policymakers’ efforts to secure Korea’s inclusion in the FTSE World Government Bond Index.
While some reforms, such as the extension of the short selling ban and the decision to scrap the capital gains tax on financial investment income, have faced criticism from foreign investors, the government remains committed to its agenda.
The proposals also aim to encourage marriage and address the country’s low fertility rate by providing tax breaks to couples and easing tax burdens for employers supporting workers with childcare expenses.
Despite projections of a reduction in government revenue of approximately 4.4 trillion won over five years due to these reforms, Finance Minister Choi Sang-mok remains optimistic about the potential benefits. The government plans to present the proposals to parliament following formal approval at a late August cabinet meeting.
