The South Korean Government has approved a plan on the value of tax expenditures for 2015, with proposals to largely retain existing tax breaks that support the country’s fragile economic recovery, despite the Government’s need for significantly more tax revenue.
An annual tax expenditure target of KRW33.1 trillion (USD29.95bn) this year is on a par with the KRW33 trillion target that was allocated in 2014, and only slightly below the KRW33.8 trillion that was allocated in 2013.
Tax expenditures, as a proportion of total tax revenue, are to fall from 14.3 percent in 2013 and 13.3 percent in 2014, to 13 percent this year.
Under the agreed framework, Korea is reviewing tax incentives and deductions worth KRW30bn or more each year. Expiring tax expenditures will be extended only if they meet certain criteria.
In addition, new tax incentives will be introduced only after an analysis of their expected outcome, with more in-depth scrutiny for any new tax expenditure costing more than KRW30bn in any one year.
In addition, all government agencies dealing with tax expenditures have until the end of April 2015 to submit information on tax reliefs to the Ministry of Strategy and Finance.