SEJONG (Yonhap News) ― South Korea might consider scaling down tax benefits available to high income earners and large businesses as part of its efforts to raise more tax revenue to meet growing fiscal demand from expanded welfare programs.
The expectation is growing as the state-run Korea Institute of Public Finance earlier made such recommendations to the government for its policy related to temporary tax cut and exemption programs.
The tax benefit programs have been provided temporarily for specific groups in order to support their lives or business activities. Experts, however, raise concerns that the benefits are now becoming entrenched, having less intended impact and increasing the burden on the government finances.
The recommendations, which were unveiled in a public hearing in Seoul on Wednesday, focus mostly on the principles that most maturing tax benefit programs will expire as scheduled and the government should refrain from granting additional tax cuts or exemptions.
In particular, the focus of the efforts is placed on high-income earners and large conglomerates, which experts expect would hike their overall tax burden.
Based on the recommendations, the government will continue to collect public opinions before finalizing its overall tax code revision proposal by the end of August that will include streamlining existing tax cuts and exemptions programs.
The proposals are the first of their kind that specify the methods by which the government can secure about 18 trillion won ($15.6 billion) over the next five years by reducing or eliminating existing tax benefits. The move is aimed at meeting growing welfare demand without hiking actual tax rates.
The government is reportedly providing tax exemptions and reductions estimated at about 30 trillion won every year. Of them, 17 trillion won goes to low- and middle-income earners, and small businesses, while 11.6 trillion won is for the wealthy and large conglomerates.
Experts say that the government needs about 135 trillion won over the next five years to deliver on the president’s major campaign pledges. The government has said that it will secure necessary money without hiking tax rates.
