Education Ministry Suggests Tax Revisions to Finance Ministry

The Ministry of Education and Human Resources Development sent a recommendation to the Ministry of Finance yesterday on imposing taxes on founder relatives of deans of colleges and high school principals.

The Ministry of Education announced on December 2 that it sent a recommendation under the education minister’s guidance to ask the Ministry of Finance and Economy to revise related clauses of the Inheritance Tax and Gift Tax Act.

Dong-A Ilbo recently reported problems concerning the National Tax Service’s imposition of 4.9 billion won in gift taxes on five community colleges.

The Ministry of Education revealed that its proposal said that it is unfair to consider even principals’ salaries as gifts while school accounting and corporate accounting are separate. It sent the proposal to require a speedy revision of the act to the Ministry of Finance and Economy.

The education ministry requested a change in wording from “school teachers” to “faculty” in Article 80, Clause 10, saying that direct and indirect expenses proposed by presidential decree include salaries for directors and employees, and expediency funds (from which school teachers are exempt).

Faculty includes presidents, deans and principals and so forth, according to Primary and Secondary Education laws and High Education laws, so money earned as heads of schools won’t be subject to corporate taxes when the act is altered.

The Ministry of Education, however, did not propose anything related to the indication that Article 48, Clause 8 of the Inheritance Tax and Gift Tax Act, which says that gift taxes when 1 out of 5 corporate directors are relatives of the founder run counter to private school laws that restrict the number of relative directors to a quarter, reasoning that revising laws “is not easy.”

A related person of the Ministry of Finance and Economy said that the ministry will review the recommendation legally as soon as it arrives, adding that law revisions should be taken up by parliament, and that act revisions should be decided by discussion of related ministries and offices at a Cabinet council.

ceric@donga.com