[EDITORIALS]Tinker now, revise laterThe Constitutional Court has struck down Article 61 of the Income Tax Law as unconstitutional. The section says that married couples should file tax returns after conglomerating both spouses' capital gains from financial and real estate assets. The ruling will force tax system changes for this year.
Going by the legal theory that married couples have to file tax returns for two people's income goes against the principle laid out in the civil code that recognizes the wealth earned and amassed by the two spouses as separate income. Furthermore, in many other countries including Germany and Japan, special tax treatment of married couples has long been obsolete on the principle that a marriage cannot be grounds for imposing discriminatory taxes.
Some critics say the court's ruling goes against the grain of public opinion that people who earn more income should pay more and that it goes against a practice in place since 1974. But we respect the court's decision because it upheld the spirit of the constitution.
The issue now is how to revise the income taxation system. Even those who respect the decision will complain that high-income earners will pay less in tax. The government only a few days ago announced revisions to the tax system in order to raise tax revenues, and it cannot afford to reduce taxes by 3 trillion won ($2.5 billion). It would be best for the government to lower the benchmark of 40 million won of capital gain a year where the government applies progressive tax rates. Married couples are invariably going to hold their wealth separately and in different categories to avoid the progressive rates. The government needs to amend the related inheritance and donation laws as well so that the government tax collections would not be reduced. There is not enough time, with just a few months left in the Kim Dae-jung administration, to alter the tax system fundamentally. The National Assembly will not have time to deliberate the revision before the presidential election.
During the current session they can limit changes to those that will replace lost revenue, and the next administration can worry about issues such as a progressive structure versus a flat-rate system.