The Korea Herald

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[Editorial] Income tax exemption

By Korea Herald

Published : July 10, 2015 - 20:16

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Lawmakers on a parliamentary subcommittee set up to deliberate taxation rules have been sitting on their hands over measures submitted by the government early this month to reduce the number of income earners exempted from tax.

This is an embarrassing scene as it was the panel itself that had asked Finance Ministry officials to work out the measures. More perplexingly, the lawmakers contradicted themselves in making the request, having put pressure on the ministry to settle complaints from wage earners who were made to pay more in the tax settlement earlier this year.

Financial authorities also backpedaled too easily on overhauling the taxation scheme to broaden the tax base.

According to data from the National Tax Service, the proportion of employed workers exempted from income tax payment rose from 31.3 percent in 2013 to 48.0 percent last year, revising a downward trend over the previous few years.

An article in Korea’s Constitution stipulates that all people are obliged to pay taxes as set by law. This obligation is essential to laying the financial foundations for running a government. With nearly half of wage earners paying no income tax, however, tax payments may no longer be regarded as a basic responsibility for every citizen.

A society can hardly remain stable and sound if many people whose income is close to the median income of all workers get away without paying a penny in tax.

The portion of wage earners exempted from taxation should be reduced to widen the base for collecting income tax. The same may be said of self-employed people, about 40 percent of whom pay no tax.

Korea needs to increase the portion of income tax in its fiscal revenues, which have fallen short of government-set targets in recent years.

Though its income tax rates are similar to those of major advanced countries, it has a far lower ratio of income tax to gross domestic product. The figure for the country remained at 3.7 percent in 2013, compared with the average of 8.6 percent for the 34-member Organization for Economic Cooperation and Development.

With the existing taxpayers assuming an increasingly disproportionate burden, it is necessary to levy tax on as many income earners as possible. Even a symbolic amount of tax needs to be imposed on low-income earners. This would help make middle- and high-income earners ready to accept possible tax rises in the future.