[Opinion] Inheritance Taxes

The district “Le Marais” in Paris, where history and the culture breathe as if they are alive today, treasures its Picasso Museum. The museum boasts its ample collection of Picasso’s work, which enables visitors to review the artist’s work in chronological order. That the museum is able to obtain hundreds of million-dollar pieces of Picasso’s work is all thanks to the high rate of inheritance taxes in France. When Picasso passed away in 1973, his successors were not able to pay the huge inheritance tax and paid it with his paintings instead. This was the beginning of the Picasso Museum.

The family of Shin Yong-ho, former president of Gyobo Life Insurance Group who passed away last September, has reported the taxed amount of his inheritance as 133.8 billion won, which is the largest amount in Korean history. Of course, it is not necessary to compare the amount with those of other moguls who have accumulated much bigger wealth and not reported the expected amount. Gift taxes while the person was alive and inflation effects should be taken into consideration. There is an investigation to be implemented by the National Tax Service (NTS) as well. Taking all these into consideration, however, the amount reported by the Shin family is still quite noteworthy.

The inheritance tax is larger in its meaning than in its real end product. The percentage it takes up of taxation as a whole is not that big and is hardly relative to the average Korean. Only one in 146 people inherit a large enough amount of money that would be subject to inheritance taxes. The NTS collected 485.3 billion won in inheritance taxes last year, along with 829.7 billion won of gift taxes. These two only make up 1.1 percent of national tax revenues. Even this amount was made possible because the government has promoted the general taxation of the inheritance tax and because the people increased their levels of gift giving and donations as a result. This increased gift tax income by 81 percent.

Unlike Korea, which is promoting higher inheritance taxes, other advanced countries are abolishing the tax or replacing it with other taxes. They say that the inheritance tax undermines the motivation for accumulating wealth, which has been one of the reasons for an economic development, and that it is a double taxation when the money has already been taxed while it was generated in the first place. However, the opposing views are also strong. George Soros, Warren Buffett, and Davidson Rockefeller have opposed the abolishment of the inheritance tax, saying that it worsens the gap between the haves and the have-nots. Which side makes more sense to us?

Editorial Writer Chun Gwang-ahm, iam@donga.com