Salaried workers decry rising taxes

Salaried workers decry rising taxes

Korea’s income tax revenue is expected to exceed 30 trillion won this year, earlier than the government’s initial estimate that it would collect that much from salaried workers next year, according to a state budget report submitted to the National Assembly Strategy and Finance Committee, Thursday.

Based on the income tax collection of 21.8 trillion won in the first eight months of this year, which surpassed the average amount of some 16.5 trillion won over the last three years, the government will be able to secure about 30.4 trillion won in income tax, up from 27.1 trillion won in 2015.

This is raising concerns as an increasing number of salaried workers are shouldering the burden of paying more taxes on their incomes to fill up state coffers in the face of low wage growth, growing income inequality and high unemployment.

The increase in income tax revenue also exceeded that of corporate taxes, with the former growing 54 percent over the last four years, compared to the latter’s 12 percent, leading to further political clashes over whether to increase taxes on corporate earnings or workers, especially high wage earners.

Last year, the country’s corporate tax revenue accounted for 21 percent of the total, down from 23 percent in 2011, while income tax revenue took up 28 percent, up from 22 percent.

A report by the Korea Economic Research Institute (KERI) showed that an increase in the tax rate on wages from the current 38 percent to 45 percent for those earning more than 300 million won a year would not only increase their tax burden but also the tax gap between the high and low income groups.

“The already high tax rate on high-income earners would further add a burden to their payrolls,” the report said, noting that the income tax rate increase from 35 percent to 38 percent in 2012 was above the average of 35.9 percent for Organization for Economic Cooperation and Development (OECD) members.

Industry sources say that this could also affect consumption, and the quality of taxation on workers’ income should be refined and improved by imposing taxes according to individual wealth or assets, rather than on how much or how hard people earn each year.

“Just because a person earns a lot does not mean he or she is rich. A tax rate increase on workers’ income as discussed in political circles will affect domestic consumption as more than half of their earnings, or about 60 percent, would actually go to paying taxes ranging from income and regional taxes to health and pension payments,” said a tax lawyer.

Besides debates over an income tax rate increase, the country’s political camps are locking horns on whether to increase corporate taxes back up to 25 percent from the 22 percent instigated during the Lee Myung-bak administration, which promoted business-friendly policies.

This move has been criticized by the Center for Free Enterprise, saying that this is going against the world trend, including the United States, which is seeking to lower corporate tax rates from 35 percent to 15 percent, and would further “worsen Korea’s economy already beset by low growth, low employment and low household income.”

Source: http://www.koreatimes.co.kr/www/news/biz/2016/11/123_218433.html


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