South Korea's government is moving to raise taxes levied on the rich to fund various social welfare projects that are critical for balanced and sustainable growth, official sources said Sunday.

Policymaking officials at the finance ministry and other government agencies said the Moon Jae-in administration is not contemplating raising income, corporate and value-added taxes but examining ways to adjust the tax bracket so the rich would be required to pay more dues. It also said the effective tax rate on businesses can be adjusted upwards by reducing various exemptions, loopholes and deductions.

"Finance Minister Kim Dong-yeon already said last month that Seoul is not considering raising income and corporate taxes," an official said. He added that policymakers are looking into other means to increase state revenue, hinting that various measures are being explored.

He said the talks undertaken by the State Affairs Planning Advisory Committee in regards to taxes have recently been passed to the finance ministry that will form the foundation for altering the tax bracket for the rich.

Changes being hinted by the government are centered on the "rich man's tax" and calls for rates of 40 percent to be slapped on people making more than 300 million won ($260,000) annually, down from the current 500 million won.

At present those making between 150 million won to 500 million won per annum are subject to 38 percent income tax rates.

"There had been talk of raising the tax rate for the top tier earners to 42 percent, but this approach has likely been scrapped despite calls by some ruling party lawmakers," said a government source, who declined to be identified.

If the changes go into effect, only about 40,000 people will be affected, reducing the likelihood of widespread public backlash or tax hike resistance.

In addition, the government may consider lowering exemptions given to inheritance taxes and financial sector profits, which can be seen as unearned income.

The country's tax office gave favors to people who voluntarily reported inheritances, while the so-called comprehensive taxation has only been slapped on people whose earnings from financial holdings exceeded 20 million won annually.

"Such tax breaks can be slashed or adjusted that can all contribute to a rise in state revenue," another mid-level official said.

He added that the extra cash brought in can be put to good use to fund various welfare projects and other ventures to assist the underprivileged. (Yonhap)