National Tax Service Commissioner Lim Kwang-hyun expressed sympathy with calls to update inheritance tax deduction thresholds that have remained unchanged for 30 years. Because he personally sponsored a bill as a lawmaker to raise the combined inheritance deduction for married couples to 1.8 billion won ($1.3 million) from 1 billion won, attention is turning to whether the dormant debate over revising inheritance deductions will reignite.
At a parliamentary audit held by the National Assembly's Finance, Economy and Planning Committee at the Government Complex Sejong 2 on the 13th, Lim was asked by Rep. Lee Kwang-jae of the Democratic Party of Korea whether the spousal inheritance deduction and the lump-sum deduction, both nearly 30 years old, needed to be brought up to date. "I fully share the intent of your remarks," Lim said.
"My thinking on what I spoke about during my time as a lawmaker has not changed," Lim said. "But I am now working at an agency that enforces tax law, so I will comment on specific institutional improvements after consulting with the Ministry of Finance and Economy." His response was read as a cautious stance that acknowledges the need to update inheritance deductions while noting that revising the tax code falls under the ministry's jurisdiction.
The 500 million won lump-sum inheritance deduction and the 500 million won floor for the spousal inheritance deduction have stood unchanged since 1997, a span of 30 years. In August 2024, while serving as a Democratic Party lawmaker, Lim was the lead sponsor of a bill to amend the Inheritance and Gift Tax Act, raising the lump-sum deduction to 800 million won and the minimum spousal deduction to 1 billion won. The aim was to reflect the reality that the inheritance tax, once seen as a levy on the wealthy, had expanded to reach the middle class as home prices and consumer prices climbed.
President Lee Jae-myung, who pledged to expand inheritance deductions during his presidential campaign, went on to cite Lim's 1.8 billion won expansion plan at a news conference marking his 100th day in office last September and called for the law to be revised. Lim also said at the National Assembly's Special Committee on Budget and Accounts in August that improving the spousal inheritance deduction was urgent.
Inheritance tax is not the only part of the tax code left unrevised for years. According to data Lee obtained from the National Tax Service, 38 deduction and tax-exempt items have gone unchanged for five years or more, and 21 of them relate to inheritance and gift taxes. The 2.5 million won basic deduction for capital gains tax has been frozen for 30 years, and the 1 million won cap on the eligible amount for the tax credit on premiums for workers' protection-type (non-savings) insurance for 24 years. Lee also raised the idea of indexing income tax brackets to inflation and asked the agency to present its assessment at the comprehensive audit session.