Let`s assume that a child who doesn`t own a home has lived with his or her parents at their house for 10 years. If home price is 500 million won (426,985 U.S. dollars) when the child finally comes to inherit it, the child has to pay around 50 million won (42,698 dollars) in tax. However, the child may not have to pay tax at all starting from next year. The government is pushing with a plan that allows inheritance tax deduction of up to 500 million won (426,985 U.S. dollars) for homes costing 500 million won (426,985 U.S. dollars) and more.
The National Assembly`s Strategy and Finance Committee preliminarily agreed on an inheritance tax revision bill on Monday. Both the leading and opposition parties have tentatively agreed that the bill allows just a small amount of tax revenue reduction while encouraging children`s dutifulness to parents and preventing family dissolution. Opinions vary among the public, however, as some say it is a good new idea while others say children could end up living with their parents even when they get old. It remains in question of how many children will actually live with and support their parents by being lured by the government`s kind consideration. The government has come up with an idea to cut taxes for those supporting parents at the time when people rarely see three generations living under the same roof.
Japan, which has entered an aging society earlier than Korea, is building a social mood that encourages property donation while parents are still alive. In Japan, the younger generation has high propensity to consume but doesn`t have enough money to do so, while elderly people, due to uncertain future, are holding on to the money and not using it. Consequently, the Japanese government has announced a plan to boost consumer spending, by encouraging old people to donate assets before they pass away. Recently, an increasing number of grandparents are directly donating assets to their grandchildren. It is becoming more difficult for younger people to build money without help by older people.
Korean parents typically give as much economic support to their children as possible. While wealthier parents think it`s natural to buy a costly apartment for their children when they get married, even ordinary parents work their tail off to raise children and prepare for their marriage. According to a report by state-owned think tank Korea Development Institute, the ratio of debts to income among Korean households aged 60 or more stands at 161 percent, which surpassed the country`s average ratio of 128 percent for all ages, meaning old people have a very heavy debt servicing burden and are vulnerable in repaying debt. More and more people are not agonizing over inheritance tax than those who do agonize, which shows how wide the gap between the haves and have-nots is in Korea.