Rising asset prices lead to higher taxes, prompting wealthy South Koreans to seek relocation
Lee Hwang Woo
Rising asset prices and a rapidly ageing population could lead more and more of South Korea's wealthy to choose to leave the country and settle permanently elsewhere, due to the burden of heavy taxes on the assets of the wealthy, experts said on Monday.
The speculation came after a survey released Sunday by the Hana Financial Research Institute ranked South Korea seventh in the world for overseas emigration of wealthy individuals.
Citing data from global investment relocation consultancy Henley & Partners, the Seoul-based institute said 800 wealthy South Koreans with net assets of more than $1 million will move permanently to other countries in 2023, up from a net outflow of 400 the previous year.
The institute said South Korea would rank second highest in the world if it took into account the proportion of millionaire immigrants in the country's total population.
According to the report, China will see the largest outflow of billionaires in 2023, reaching 13,500, but China's population is more than 28 times that of South Korea.
An official in the wealth management department of a private bank, speaking on condition of anonymity, said more wealthy people could leave the country as rising asset values amid continued high inflation could lead to them being taxed more heavily.
“For example, a comprehensive real estate holding tax will be levied on private homeowners whose homes are valued at more than 1.2 billion won ($878,900),” the official said, adding that the tax has been described by some as a punitive measure against owners of expensive homes.
He further noted that the price of an apartment, the most popular type of housing in South Korea, averages 1.29 billion won in Seoul.
“This means that many Seoul residents will have to pay punitive taxes just for living in apartments, and the burden of such taxes will obviously be heavier on the wealthy,” he said.
Kim Jae-kyung, principal consultant at real estate firm Tumi, said the burden of inheritance tax could be another reason for the wealth flight, as more Koreans are ageing and want to pass on their assets to their children before they die.
Kim noted that South Korea ranks second only to Japan in the OECD when it comes to inheritance tax rates: South Korea's top inheritance tax rate is 50 percent, compared with 55 percent in Japan and an OECD average of 25 percent.
“As South Korea enters a super-aging society, more people will be required to pay inheritance tax. Some people may want to protect their assets by moving to countries where inheritance tax is much lower,” Kim said.
