ASIA: Korea far outpaces OECD average in inheritance tax, according to report.

As published on koreaherald.com, Friday 17 June, 2022.

South Korea far outstripped the average of the Organization for Economic Cooperation and Development in the ratio of inheritance and gift tax revenues to gross domestic product, a local think tank said Friday.

In a report, the Korea Economic Research Institute said Korea posted 0.5 percent in the ratio of revenue from inheritance and gift tax to GDP, which placed the nation at No. 3 among the OECD members as of 2020.

While the institute said the level was higher by 0.3 percentage point, compared to the OECD average of 0.2 percent, it did not specify how many countries among the 38 OECD members it was compared to.

The KERI also said the maximum taxation rate on inheritance to children and grandchildren in Korea was higher by about 25 percentage points than the OECD average -- 50 percent vs. 25 percent.

The maximum inheritance tax rate reaches 60 percent for stock inheritances as extra charges are imposed, making it the highest level among members of the Paris-based organization, the institute claimed.

It also raised the possibility of double taxation, saying that previously income taxation targets could also become inheritance taxation targets later.

KERI argued that “the nation should ease the burden of inheritance tax, in reflection of the global trend that most OECD countries do not levy inheritance tax or applicate eased tax rates as long as the wealth is offered to direct descendants.”

It suggested a maximum inheritance tax rate of 30 percent as an optimum level.

Under the assumption that sufficient income tax would have already been levied on the descendants during the process of accumulating their wealth, many OECD members are imposing inheritance tax rates that are lower than income tax rates, according to the KERI report.