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Income base for tax hike raised to 55m won
Government modifies revision to ease tax burden for mid-income brackets
By Park Hyung-kiPublished : Aug. 13, 2013 - 21:44
The Ministry of Strategy and Finance said Tuesday that it would raise the baseline income dividing the top and mid to low income earners from 34.5 million won to 55 million won as part of its tax code revision.
This would significantly decrease the number of workers facing tax burdens from the government’s earlier proposal to about 2 million, from more than 4.3 million people, who were categorized in the top 28 percent bracket.
Those with an annual salary of more than 55 million won will face tax hikes, while those with less than that would be categorized as mid and low income earners and see benefits of expanded tax deductions.
In a meeting with the ruling Saenuri Party, Deputy Prime Minister and Finance Minister Hyun Oh-seok said it would increase income tax deductions especially for mid-income families with annual income of between 15 million won and 45 million won.
The government made its first policy U-turn and redrew its tax proposal as public backlash and political friction escalated since it introduced its revision last Thursday.
Political parties lashed out at the tax overhaul policy, calling it a “tax bombshell” on the working middle class, and even made senior presidential economic adviser Cho Won-dong “speechless,” indicating that he was surprised by the proposal that could adversely affect the middle class.
The negative response both from the public and political circles prompted the Finance Ministry and presidential aides to go back to the drawing board and redraw tax codes that are more aligned with benefiting the middle class.
The modification of its initial tax revision included increasing tax collection by strengthening probes into high-income professionals and the self-employed who mostly favored making business transactions in cash to avoid taxation.
It would maintain its initial plan to reduce tax deductions on credit card spending as this would help the country deleverage household debt.
Instead, the government would encourage the use of check cards and cash receipt cards, which would see more tax deductible benefits.
The tax overhaul was part of the administration’s efforts to secure about 50 trillion won of 135 trillion won to be spent on welfare over the next four years.
The government is expected to see some hardship in passing the revision at the National Assembly as the country’s opposition party demands much higher taxes on the rich that could deal a political blow to the ruling party and President Park Geun-hye.
By Park Hyong-ki (hkp@heraldcorp.com)
This would significantly decrease the number of workers facing tax burdens from the government’s earlier proposal to about 2 million, from more than 4.3 million people, who were categorized in the top 28 percent bracket.
Those with an annual salary of more than 55 million won will face tax hikes, while those with less than that would be categorized as mid and low income earners and see benefits of expanded tax deductions.
In a meeting with the ruling Saenuri Party, Deputy Prime Minister and Finance Minister Hyun Oh-seok said it would increase income tax deductions especially for mid-income families with annual income of between 15 million won and 45 million won.
The government made its first policy U-turn and redrew its tax proposal as public backlash and political friction escalated since it introduced its revision last Thursday.
Political parties lashed out at the tax overhaul policy, calling it a “tax bombshell” on the working middle class, and even made senior presidential economic adviser Cho Won-dong “speechless,” indicating that he was surprised by the proposal that could adversely affect the middle class.
The negative response both from the public and political circles prompted the Finance Ministry and presidential aides to go back to the drawing board and redraw tax codes that are more aligned with benefiting the middle class.
The modification of its initial tax revision included increasing tax collection by strengthening probes into high-income professionals and the self-employed who mostly favored making business transactions in cash to avoid taxation.
It would maintain its initial plan to reduce tax deductions on credit card spending as this would help the country deleverage household debt.
Instead, the government would encourage the use of check cards and cash receipt cards, which would see more tax deductible benefits.
The tax overhaul was part of the administration’s efforts to secure about 50 trillion won of 135 trillion won to be spent on welfare over the next four years.
The government is expected to see some hardship in passing the revision at the National Assembly as the country’s opposition party demands much higher taxes on the rich that could deal a political blow to the ruling party and President Park Geun-hye.
By Park Hyong-ki (hkp@heraldcorp.com)
