South Korea’s Ministry of Strategy and Finance said Monday it would readjust and revise some of the country’s income tax codes after closely evaluating the changes in the patterns of tax payments and individuals’ tax burdens stemming from settling the previous year’s taxes.
This comes amid growing public criticism that many income earners will have to pay more taxes than receive tax refunds next month as they file their year-end taxes with the National Tax Service this month.
The Finance Ministry said that the tax burden was likely to increase especially among high-income earners as the country revised relevant income tax codes two years ago to “collect less and refund less” by decreasing the number of tax exemptions and changing some benefits from tax deductions into tax credits.
The government changed the country’s tax system to counter growing tax revenue shortfalls and narrow the income gap between high- and low-income earners.
“The government changed the income tax codes to collect and return less from its previous stance of collecting and returning a lot to revitalize the economy in September 2012,” a Finance Ministry official said.
Last year, it expanded the high-income tax bracket to levy a 38 percent income tax on those whose annual salary exceeded 150 million won ($140,000), previously from imposing a 38 percent tax on those who earned more than 300 million won. This was aimed at levying higher taxes on the rich to redistribute wealth to the low-income group.
The government also changed some tax incentives allowing people to claim tax credits on benefits such as pension savings, and education and medical expenses, which used to be deductible from individuals’ income in accordance with their tax rates, to promote fairness.
To this end, the Finance Ministry noted that people who make more than 70 million won a year, or are in the top 10 percent income bracket, would face a heavier tax burden as the country expanded refundable tax credits to low-income families.
“We will have to consider revising tax laws (with lawmakers) in the second half of this year after people file their year-end taxes,” said the ministry official.
Political parties also responded to mounting anger from salaried workers over the reduced refunds.
The ruling Saenuri Party said it would take appropriate measures after analyzing the reduced income brackets.
Deputy policymaker Na Sung-rin of the ruling party revealed the plan during a news conference arranged after Finance Minister Choi Kyung-hwan indicated the revision of the tax law.
The main opposition National Politics for Advanced Democracy lashed out at the government, attributing the seed of the controversy to its “false” tax policy.
NPAD leader Moon Hee-sang said the controversy over the downsized year-end tax deduction benefit came as a result of the government’s move to offset the revenue deficit caused by corporate tax cut with workers’ salaries.
By Park Hyong-ki (email@example.com)