South Koreans in their 20s and 30s are likely to face a heavier tax burden than the older group due to the country’s rapid aging population and demographic changes, according to a media report on Wednesday.

Yonhap News Agency shared an analysis by Professor Chun Young-jun, a professor of economics and finance at Hanyang University, who estimated the net tax burdens by generation using the intergenerational accounting concept.

The analysis showed that 13.3 percent of the gross value added will need to be allocated to compensate for future fiscal deficits arising from current policies.

The primary threat to fiscal stability lies in the welfare system, according to the report.

In particular, an additional funding of 4.2 percent for public pensions, 2.3 percent for basic pensions, 4 percent for health insurance, 2.3 percent for long-term care benefits, and 0.5 percent for basic livelihood benefits would be necessary, it said.

When projecting upward-adjusted taxes for 2025 and calculating the lifecycle net tax burden by generation, it was found that the increase for the younger group exceeded that of the elderly in the base year.

Those in their 20s and 30s are expected to bear an additional burden close to 20 percent of their lifetime income, surpassing 40 percent in absolute terms.

The report also presented expert suggestions for the country’s further growth.

Professor Park Jung-soo of Sogang University noted that policy packages should aim to accelerate corporate growth and reduce labor productivity and wage disparities to foster economic growth.

Park stated that Korea has a high proportion of employment in small businesses compared to other members of the Organization for Economic Co-operation and Development, adding that the corporate growth pace in Korea is more than twice as slow as in the United States.

The economist suggested that the government should engage in targeted taxation and financial support for corporations based on size, along with efforts to relax labor market rigidity and resolve policy inconsistencies and uncertainties.

Park recommended avoiding rapid institutional changes or direct interventions to eliminate disparities.

[ⓒ Pulse by Maeil Business News Korea & mk.co.kr, All rights reserved]