Earning Less, Paying More

Home > Business > Finance

print dictionary print

Earning Less, Paying More

Taxpayers earned less income following the financial crisis, but their tax burden increased, according to a study conducted by a public research institute. People in the late their fifties fared the worst, the study found, as their income failed to recover to the level earned at the height of the crisis that shook the economy.

Research fellow Sung Myung-jae of the Korea Institute of Public Finance, who led the study, said that while the average amount of taxes paid in 1998 decreased due to reduced taxable income taxpayer burden increased. "The government raised rates on special taxes as it saw the income tax base shrinking," he said.

The study found that the average income for the population fell from 28 million won ($20,500) in 1997 to 24.5 million won in 1998 but recovered somewhat to 27.1 million in 1999 as the country rode out the financial crisis.

The average amount of taxes paid fell from 2.3 million won in 1997 to 2.1 million won in 1998. While income in 1999 remained below the 1997 level, the average person was paying more in taxes. The average amount of taxes increased to 2.4 million won in 1999.

The institute's index of effective tax burden, which shows the amount of taxes assessed on all income plus various consumption taxes as a proportion of total taxable income, shows the tax burden increased during the three years. The index, which stood at 8.09 in 1997, rose to 8.42 in 1998 and to 8.96 in 1999.

The increase in the tax burden during 1999 can be explained by higher earnings and increases in spending as the economy began recovering, Mr. Sung said. "Individual business owners, in particular, saw taxes increase significantly," he said.

While most taxpayers saw their earnings increase in 1999 from the previous year, people between the ages of 55 and 60 earned less, the study found. Their average income decreased to 28.5 million won in 1999 from 29 million won in 1998 and 32.2 million in 1997.

"People in their fifties were the primary target of downsizing and early retirement in corporate and financial restructuring," Mr. Sung said.



by Kim Young-sae

Log in to Twitter or Facebook account to connect
with the Korea JoongAng Daily
help-image Social comment?
s
lock icon

To write comments, please log in to one of the accounts.

Standards Board Policy (0/250자)