Government plans to raise 1.7 trillion won in additional tax revenue by 2021


The government turned its focus for its tax revision bill on expanding the overall tax revenue base by finding hidden income sources and streamlining related laws rather than hiking tax rates, the finance minister said Wednesday.

“Our tax bill this time is focused on legalizing (hidden) tax sources, expanding the overall revenue base, which is deemed to be less transparent than other advanced countries, and reducing the size of the underground economy rather than hiking tax rates,” Minister Bahk Jae-wan said.

He also said that the government revised the tax code in a way that it could provide a boost to the economy in the short term and eventually stabilize the livelihood of low-income citizens who are more vulnerable to economic crises.

The government is facing a challenge of striking a balance in crafting the tax revision bill between expanding its income base for a balanced budget and helping boost the economy faced with growing uncertainty.

Under the bill, the government plans to raise 1.7 trillion won ($1.5 billion) in additional tax revenue from next year through 2021 by raising levies on corporations and investors as officials grapple with rising welfare costs.

The government also proposes increasing the minimum corporate tax to 15 percent from 14 percent on companies with annual net income over 100 billion won.

Income tax on annual investment earnings would start from 30 million won, down from 40 million won, and varying rates will apply to derivative trades, the Finance Ministry said.

“The 2012 tax revision aims to respond to the European fiscal crisis and the sluggish global economy, while broadening the tax base for the country as the costs of an aging population rise,” Minister Bahk told reporters at a briefing on tax revision.

A levy on the principal of inflation-linked bonds would start from 2015, the ministry statement said, and new taxes on derivative trades would take effect in 2016.

To help create more jobs and investment in the face of cloudy economic conditions, the government will expand tax benefits for companies that hire more workers or bring their overseas offices back home, the ministry said.

Another focus of the revision is to stimulate domestic demand, a move aimed at helping offset weak exports to overseas markets gripped by protracted eurozone debt problems and slowing growth in major economies.

To boost consumption, the government will ease special consumption taxes on energy-efficient electronics products and the use of golf courses.

In order to jolt the housing market out of its slump, the government also plans to ease taxes imposed on capital gains by multiple-home owners, which it hopes could boost overall property transactions.

(From news reports)