South Korea’s presidential policy advisory panel made it official Thursday that the liberal Moon Jae-in government will impose higher taxes on high-income earners and conglomerates in the long term, while continuing tax incentives for low-income households.
The State Affairs Planning Advisory Committee, in charge of setting up long-term five-year policy plans, said it will seek to establish a tentatively-named “Special Committee on Taxation and Fiscal Reform” in the second half.
Consisting of experts and representatives of diverse groups, the special committee will decide on thorny issues such as raising corporate tax and revising tax codes for transport energy goods.
“The Moon Jae-in government will normalize tax codes that have been distorted to cut taxes for the rich. With fair taxation, the government will enhance the income redistribution of society,” Park Kwang-on, the spokesman for the committee, told reporters during a briefing in Seoul.
Park’s comment was in line with President Moon Jae-in’s campaign pledges to first enhance taxation on high-income earners and to start discussing a corporate tax rate hike as a last resort if the government is still short of tax revenue.
Park added, however, that the government will not seek to immediately revise the current tax codes on corporate tax and energy this year, as “such issues will need social consensus.”
Starting from the second half of the year, the special committee said it will also seek to raise the tax deduction rate on monthly rent payments to alleviate the financial burden of low-income households.
Currently, the government offers tax deductions on 10 percent of monthly rent fees for those earning less than 75 million won ($65,790) a year.
The government also plans to expand tax incentives for companies that increase wages for employees higher than the industry average wage hike in order to buffer the shock of rising costs from a gradual increase of the minimum wage.
The Moon administration plans to increase the minimum hourly pay to 10,000 won by 2020 from the current 6,470 won.
By Kim Yoon-mi (email@example.com)