An article in our Constitution stipulates that all Koreans are obliged to pay taxes as set by laws. This obligation is essential to lay the financial foundation for governing a state.
However, tax payment may no longer be regarded as a basic responsibility for every citizen now that nearly half of wage earners pay no income tax. According to data from the National Tax Service, the proportion of employed workers exempt from income tax payment increased from 31.3 percent in 2013 to 48.0 percent in 2014.
The steep increase, which reversed a downward trend over the past few years, was attributed partly to a revised taxation system that has reduced the burden on low-income earners. Another reason might be the growing number of part-time or temporary workers.
Financial authorities backpedaled on overhauling the taxation scheme to broaden the tax base in the face of complaints from middle-income workers who were made to pay more in the tax settlement early this year.
Korea needs to increase the portion of income tax in its fiscal revenue.
Though its income tax rates are similar to those of major advanced countries, Korea 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.
In contrast, the ratio of corporate tax to GDP in Korea, which stood at 3.4 percent in 2013, is higher than the OECD average of 2.9 percent.
International comparison may not be an absolute standard for the taxation policy of a country that has its own specific economic and social conditions. But it certainly sounds reasonable to argue that Korea has some room for increasing its reliance on income tax in collecting more revenues needed to finance expanded welfare programs.
The idea of raising corporate tax rates may not remain untouched. But caution is needed in taking the measure, which would increase tax revenues in a short period but reduce them over a longer term by discouraging corporate investment, which in turn would result in slowing down growth and decreasing jobs.
Raising tax on earned income is also necessary to ensure a more effective redistribution of wealth in Korean society.
The oversized portion of wage workers exempt from tax payment should be reduced to expand the base for collecting income tax. The same may be said of self-employed people, about 40 percent of whom pay no tax. A society cannot remain stable and healthy if many people whose income is close to the median income of all workers get away without paying a penny in tax.
Politicians and government policymakers should also try to avoid wasting taxpayers’ money on populist and half-baked programs so as not to make people skeptical about carrying out their constitutional duty of paying due taxes.
