Shin Hyun-song, nominee for Bank of Korea governor and former economic adviser and head of the Monetary and Economic Department at the Bank for International Settlements (BIS), has recently drawn attention as a potential savior for interest rate and monetary policy. Expectations are high for him amid concerns over currency volatility and stagflation triggered by the Middle East conflict.
However, Shin has faced criticism for holding an asset portfolio seemingly at odds with a position responsible for interest rate decisions and monetary policy, with more than half of his reported assets exceeding 8.2 billion won held in foreign currency.
His gap investment 12 years ago in his mother's Gangnam apartment in Seoul, which yielded over 2 billion won in unrealized gains with apparent gift tax benefits, has also sparked controversy. His mother, who held over 1.1 billion won in deposits in a single bank account, continued living in the property on a low-cost jeonse lease after selling it, and has resided there rent-free since last year. Shin has also been questioned about registering his British-citizen eldest daughter as a domestic resident in his Gangnam apartment two years ago, allegedly to access national health insurance benefits.
Popular entertainer Cha Eun-woo underwent a tax audit after distributing his high personal income through a single-person corporation registered under his mother's name to benefit from lower corporate tax rates rather than the high individual income tax rates. He was initially assessed back taxes of around 20 billion won and ultimately paid approximately 13 billion won after adjustments and refunds. This reflects how celebrities, athletes, and high earners walk a fine line between legal and illegal tax practices.
Raising these tax issues involving public officials and celebrities amid the global impact of the Middle East conflict is necessary because external shocks require examination of both fairness in the tax system and its capacity to respond to economic cycles. Taxes significantly influence consumption, investment, and production decisions of individuals and businesses, beyond just equity concerns. This is why fundamental tax law revisions should be considered ahead of the regular National Assembly session this September. President Lee Jae-myung has drawn attention by calling for tax system reforms in areas such as the "money move" from real estate to capital markets and sectors unrelated to business succession.
First, income tax brackets for salaried workers—often called "glass wallets" for their transparent and fully taxable income—should be adjusted upward to reflect high inflation. It is unreasonable to impose what amounts to "stealth tax increases" on workers whose real incomes have barely risen, simply because they offer little resistance to taxation. The complex system of income tax deductions should also be overhauled.
There are many loopholes in inheritance and gift taxes as well. While inheritance tax is levied on total estate value, gift tax is assessed per recipient, resulting in higher inheritance tax burdens. The system should shift to an inheritance acquisition tax model where each heir pays based on their actual share. The complex deduction system also favors those with access to skilled tax advisors.
Reducing inheritance tax burdens for succession of technology-based businesses is desirable, but extending benefits to nominal "bakery cafes" or parking lot businesses reflects out-of-touch policymaking. The practice of some business owners deliberately suppressing stock prices before gifting shares and continuing to funnel contracts through family corporations is also linked to high inheritance tax burdens. Consideration should be given to offering significant tax reductions to heirs who entrust inherited shares to universities or national research institutes for a specified period, with dividends directed toward research and development.
While inheritance and gifts of artwork and antiques are technically taxable, enforcement is practically difficult. Transfers of virtual assets (cryptocurrency) are also hard to track when conducted through overseas exchange accounts or personal wallets. Taxation on cryptocurrency trading gains was originally scheduled for implementation in 2023 but has been repeatedly delayed, with enforcement now set for January next year—further postponement should not be permitted.
Most importantly, with potential growth rates projected to fall to around 0 percent by the 2040s according to the Korea Development Institute, tax reforms to foster venture startups are urgently needed. The complex taxation system for stock option exercise gains discourages long-term employment and burdens companies with additional costs. There are even cases of employees resigning to pay the lower "other income tax" rather than high earned income tax. For real estate, while raising holding taxes should be balanced with reductions in transaction taxes, some limitations on long-term special holding deductions for ultra-high-priced properties should also be considered.
The importance of tax justice for economic equity and vitality cannot be overstated.
