select languages
Breaking down President  Park Geun-hye's U.S. Congressional speech in word cloud
sns RSS mobile twitter
latestnewslatestnews RSS
Editorials from Dailies
Home > Editorials from Dailies
(EDITORIAL from the Korea Times on Aug. 10)

Tax code overhaul Too much burden placed on middle class

Salaried workers are often compared to a "glass bead wallet" in that their incomes are transparent and visible to all. They are the first target whenever the tax authorities need to raise more revenue, and the Strategy and Finance Ministry's tax overhaul plan for next year, unveiled Thursday, was no exception.

Under the plan, the first taxation blueprint drawn up by the Park Geun-hye administration, 4.34 million people whose annual income exceeds 34.5 million won ― about 28 percent of total salaried workers ― will have to pay more taxes. This is in accordance with a change in the method of calculating deductions by the government that felt the need to do so in order to raise funds to make good on Park's welfare pledges. Simply put, the change deprived salaried workers of deduction benefits worth 1.3 trillion won, all of which the government says will go to low-income households.

The plan calls for taxing large conglomerates nearly 1 trillion won more by cutting tax deduction rates for R&D activities from the current 7-10 percent to 3 percent. Putting an end to years of controversy, the government also decided to impose taxes on the clergy.

The latest tax overhaul plan is a step in the right direction, given that it envisions raising the tax burden for high-income earners and large companies but lessening the burden for low-income earners and small and medium-sized firms. But the problem is that middle-income earners and the working class will be hit hardest.

As soon as the tax plan was revealed, the main opposition Democratic Party accused President Park of reneging on her campaign promises not to raise taxes and vowed to revise the plan in such a way so as to let high-income earners and large enterprises shoulder greater burden. The ruling Saenuri Party, for its part, looked embarrassed with the severity of the plan and said that there would be revisions in the course of the parliamentary deliberation, apparently conscious of the possible backlash in the coming elections.

But the fact is, the latest tax initiative falls far short of meeting demand for even short-term fiscal outlays at a time when tax collection has been slow amid the prolonged economic slump. The finance ministry says the tax plan could enable it to raise only 2.5 trillion won more over the next five years, but this figure is well below the 18 trillion won the ministry estimated in May as additional tax revenue through the adjustment of deductions in the five-year period.

It's quite doubtful if the Park administration will be able to raise 135 trillion won needed to deliver on her welfare promises without creating new tax items or raising current tax rates. Given this, President Park should refrain from resorting to stopgap measures and present a clear-cut and realistic blueprint on our fiscal situation over the next five years.