[Editorial] The tax reform plan requires more than partial amendments

The government convened a State Council meeting on the 1st and adopted a partially amended version of the tax reform proposal. It withdrew the original plan to reduce the basic exemption for comprehensive real estate tax for non-resident single-homeowners and to raise the cap on property tax burdens. The contract period and contribution limit for Individual Comprehensive Asset Management Accounts (ISA) were maintained as they are. It is fortunate that the government partially accepted public opinion raised during the legislative notice period and objections from the political sphere. However, a significant portion of the controversies remains unresolved and has been passed to the National Assembly.

Withdrawing the reduction of the comprehensive real estate tax exemption for single-homeowners is somewhat reasonable, but it remains controversial whether differentiating exemptions based on residency status is appropriate. Additional discussion in the National Assembly is needed regarding the blanket relative disadvantage imposed even on cases where individuals cannot reside in their homes due to unavoidable circumstances.

The revision of the business inheritance tax exemption also requires re-examination by the National Assembly. The government maintained its original proposal, which narrowed the scope of eligible industries and strengthened conditions for the duration of business operations. While the government's plan aims to block illegal succession, there is considerable concern that it may stifle normal business succession. It should be considered that the business inheritance tax exemption is not merely a system to reduce inheritance taxes but also serves to prevent the loss of technology and support job retention.

The same applies to the tax reform plan related to preventing stock price suppression. The government's proposal deems companies whose Price-to-Book Ratio (PBR) ranked in the lower tier by industry for 12 out of the most recent 13 semi-annual periods during the inheritance or gift process of listed stocks as "estimated stock price suppression companies." However, it remains controversial whether inferring intentional stock price suppression based solely on a long-term low PBR is appropriate and how to distinguish various factors influencing corporate valuation.

The government appears unable to avoid criticism that it amended issues with significant public backlash and broad impacts on citizens' lives but passed unchanged proposals regarding matters with relatively fewer stakeholders and less social attention to the National Assembly. Policies should not reflect only the demands of those with louder voices. Even for matters involving few stakeholders, it is the government's responsibility to examine the unreasonableness and side effects of the system before implementation.

Correcting issues that the government failed to address now falls to the National Assembly. The final plan must be derived by carefully evaluating the effectiveness of each system affecting citizens' economic activities, ensuring a balance between tax principles and economic reality.