South Korea is expected to offer 33.1 trillion won (US$29.9 billion) in tax relief to support economic recovery this year, slightly up from last year, the finance ministry said.
The government’s expected tax relief for this year was slightly higher than an estimated 33 trillion won in 2014, but smaller than the 33.8 trillion won in 2013, the ministry said. The exemption rate, however, is forecast to fall to 13 percent this year, compared with 14.3 percent in 2013 and 13.8 percent in 2014.
The tax exemption rate is calculated by taking into account expected tax earnings and exemptions, and dividing the total with the tax relief to be offered.
Reducing the exemption rate means the government can collect more revenue without actually raising taxes.
The government said it aims to collect 221.1 trillion won in taxes this year, up from 205.5 trillion won in 2014.
The extra money can be used to finance the growing demand for social welfare-related outlays.
The finance ministry said of the total exemptions, 21.8 trillion won will be for private citizens, with 10.5 trillion won going to businesses. Of the tax exemption to be given to citizens, 61.7 percent will benefit lower and middle income earners, with 58.8 percent of corporate tax exemptions to help small and medium enterprises (SMEs) and larger mid-size companies.
In contrast, the percentage of exemptions for high income earners will be marked down from 38.6 percent last year to 38.3 percent in 2015, with numbers for very large companies dipping to 24.1 percent from 25.8 percent.
“The changes to tax exemptions are all geared to helping breathe new life into the economy and scaling back benefits to big businesses and high income earners, while giving more to ordinary citizens and SMEs,” the ministry said.
Related to streamlining the country’s tax exemption rules, the finance ministry said it will introduce new feasibility studies and an in-depth review process starting this year for all new relief projects that can result in tax exemptions exceeding 30 billion won or more annually.