The Importance of Tax Cuts in South Korea’s Economic Strategies

South Korea recently proposed a series of tax cuts in an effort to stimulate the domestic stock market and address the country’s declining birth rate, which is currently the lowest in the world. These tax cuts are part of a broader strategy known as the “Corporate Value-up Programme,” introduced earlier this year by the finance ministry.

One of the key components of the proposed tax cuts is a revision of inheritance taxes, which have been identified as a major factor contributing to the “Korea discount.” By lowering the highest tax rate on inheritance from 50% to 40% for amounts exceeding 1 billion won, the government aims to encourage family-run companies to make decisions that will boost stock prices without the burden of excessive taxes on future generations.

Corporate Income Tax Exemptions

In addition to inheritance taxes, the proposal includes tax exemptions on corporate income to incentivize firms to increase capital returns. By lowering taxes on dividend income and providing tax benefits for investment income earned through savings accounts, the government hopes to attract more retail investors and promote economic growth.

Recognizing the importance of addressing the country’s low birth rate, the government plans to offer tax cuts for couples married between 2024 and 2026 as an incentive to have children. To further support families, the proposal includes tax cuts for households to assist with childcare costs and exempts tax on childbirth bonuses paid by employers.

Overall, South Korea’s proposed tax cuts are part of a comprehensive strategy to boost economic growth, stimulate the stock market, and address social issues such as the declining birth rate. By targeting inheritance taxes, corporate income tax exemptions, and incentives for families to have children, the government hopes to create a more favorable environment for investment, business growth, and family development. The success of these tax cuts will depend on their implementation and the response of the national assembly, which is currently under opposition control.