South Korea is taking steps to revitalize its economy and address its declining birth rate by proposing tax cuts aimed at stimulating the stock market and encouraging families to have more children. These measures are part of a broader initiative to enhance the Corporate Value-up Programme and make the country more attractive for investors.
One of the key components of the proposal is the reduction of inheritance taxes, which have been identified as a significant barrier to corporate succession in South Korea. By lowering the tax burden on inherited wealth, the government hopes to incentivize family-run companies to make decisions that will increase stock prices and improve their overall valuation.
The Ministry of Finance plans to eliminate the highest inheritance tax rate of 50% on assets exceeding 3 billion won and replace it with a 40% rate for assets exceeding 1 billion won. Additionally, the top of the lowest tax bracket will be raised to 200 million won, with a tax rate of 10%. These adjustments aim to align South Korea’s tax system with international standards.
In addition to inheritance tax reductions, the government is proposing tax exemptions on corporate income to promote capital returns and lower taxes on dividend income. The plan also includes incentives for retail investors, such as tax benefits on investment income through savings accounts. To address the falling birth rate, the government is offering one-time tax cuts to couples married between 2024 and 2026, as well as increased tax cuts for childcare expenses and exemptions on childbirth bonuses.
The Ministry of Finance intends to present the tax cut proposal to the national assembly for approval by September 2. However, the assembly is currently controlled by the opposition, making the outcome uncertain. Despite potential challenges, the government is determined to implement these tax reforms to support economic growth and combat demographic challenges in South Korea.
Overall, the South Korean government’s proposal to implement tax cuts as part of its efforts to boost the economy and address the declining birth rate is a bold and strategic move. By reducing inheritance taxes, encouraging investment, and supporting family growth, the government is demonstrating its commitment to fostering economic prosperity and social well-being in the country. It remains to be seen how these proposed tax cuts will be received by the national assembly and implemented in practice, but they have the potential to bring about positive change in South Korea.