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Ruling party demands tax rate hike for the richest, may affect Korea’s tax code proposal next month

Collected: 2017.07.21

Distributed: 2017.07.26

Source: Go Direct

President Moon Jae-in (center) has a dialog with (from left) Deputy Prime Minister and Education Minister Kim Sang-gon, State Affairs Planning Advisory Committee Chief Kim Jin-pyo, ruling Democratic Party Leader Choo Mi-ae, and Prime Minister Lee Nak-yeon during a meeting on national fiscal strategy held at Cheong Wa Dae on Thursday. [Photo by Lee Choong-woo]

The administration under South Korean President Moon Jae-in and ruling Democratic Party began to set the grounds to raise tax rates for highest-income earners and companies.

In a meeting on national fiscal strategy held at Cheong Wa Dae presided over by President Moon, Democratic Party chief Choo Mi-ae said the government needs to restore a top tax bracket for companies earning more than 200 billion won ($178.2 million) for a levy of 25 percent rate, while keeping the current 22 percent unchanged for most others earning less than that.

Korea’s current maximum corporate levy is 22 percent on companies earning 20 billion won and beyond. It has stayed so after the top 25-percent levy was scrapped under the Lee Myung-bak administration in 2008.

The top bracket levy won’t influence most of the companies and will be limited to a selected number that have enough cash for facility investment and R&D spending, Choo said.

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The ruling party estimated the corporate tax revision could bring an additional 2.93 trillion won to the government in tax revenue.

Choo also proposed to up the levy on top-income bracket on individual taxpayers to 42 percent from 40 percent for those earning more than 500 million won a year.

Under such proposal, 46,000 individuals with reported earnings of 500 million won or higher would see bigger tax bills for the second straight year from 38 percent two years ago.

The government had planned to study higher taxes for the rich from 2019 or 2020. Since the ruling party has officially floated the idea, it now may look into incorporating it from the 2018 tax code that the government will prepare by next month.

By Cho Si-young and Oh Soo-hyun

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