[OUTLOOK]The tax policy is an outrageDespite all the economic difficulties, taxes are going up again this year. After this rise, another is expected.
Tax bills make our heart sink. The automobile tax and the price of liquefied gas have soared. The property tax is startling. How on earth will the government spend the tax it collects?
The administration claims to represent the common people, but here come higher taxes amid a recession, slack spending, increased unemployment and growing numbers of the poor. The government talks about improving people’s lives, but at the sane time it makes a desperate attempt to collect and spend taxes.
Rather than creating a pedantic theory, let’s try asking in easy-to-understand language why the government should raise taxes when the economy is suffering as a result of meager consumer spending. Automobiles aside, what is the reason for cutting incomes by increasing the tax on vans several fold? The small trucks are an indispensable means of making a living for the self-employed. Can’t taxi drivers and poor people be exempted from the fuel tax increase? It is understandable to raise property taxes to control housing prices. But I’d like to ask if the government had to hurt the construction industry, one of the largest employers of the poor and common people. Was there no other way?
A pro-government newspaper ran a headline that said, “60 percent of the people benefit from the tax reduction” on their property, while other major news outlets pointed to the 30 percent who would see sharp increases in their tax bill.
According to a forecast by the Seoul municipal government, three homeowners out of five face higher property taxes, with the average bill going up by 32 percent next year and 87 percent by 2008. Twenty-three percent of real estate owners in Seoul will pay more than double the current tax within two years. In general, the property tax on a 400-million won ($360,000) apartment was about 200,000 won this year. Next year the bill will be 300,000 won and by 2008 about 750,000 won.
Just think what a burden it will be to pay 750,000 won in property taxes and 700,000 won for the automobile tax out of a 3- to 4-million won monthly paycheck. If Gangnam, southern Seoul, has a problem, only this area should be carpet-bombed with higher taxes. But why should Gangbuk, northern Seoul, and its innocent residents be hit by the blunderbuss approach?
For Gangnam residents as well, why should they pay property taxes that amount to fines, as if they were facing the sword of justice? Isn’t it unreasonable to ask a salaried man, who has just settled down in a 600-million won apartment in Gangnam after having moved 20 times, to pay about 1.2 million won in taxes?
The policymakers at the Blue House say the property tax in Korea is much lower than that of advanced countries, but their remarks are hiding the huge differences in housing policies and the environment. To the Korean people, owning a house is a lifelong wish. People who buy homes are not to blame, when the government’s failure to provide rental houses and public housing for homeless poor people is seen as a terrible policy failure.
What is worse, the new system has forced prices of small homes to fall, again hurting less well-to-do residents.
If the government, in line with its progressive political inclination, wanted to double the property tax rate, it could have raised the rate of tax cuts accorded to two fifths of the population under the new system to 70 to 80 percent. But the government has been stingy in tax deductions.
In addition, I am trying to understand on what the government is going to spend these taxes it is levying.
I want to know how much more the government expects to collect and what the money will be spent on.
Some of the money from the comprehensive real estate tax apparently is intended for rural development, but the government should seek approval of the people on these projects in the countryside. It applies all kinds of standards to public funds granted to small and medium-sized businesses, so why doesn’t the government follow such rational procedures for rural development? From a different perspective, the problem of urban poverty is more urgent, so why should the tax be used primarily for rural areas over others?
I will gladly approve if the new revenues are used to create jobs and support the 4 million poor people. But the government is more concerned about large-scale projects.
Korea’s overall tax burden is 23 percent of income. It is low compared to the 35 percent of Germany and England, but this figure will rise sharply under the current administration’s plans for big national projects.
I wish my country were a welfare state like Germany, even if I had to pay 10 percent more. Then, I’d be free from the burden of medical and educational expenses and liberated from the pressure of housing prices.
In fact, including the social insurance expenses, a quasi-tax, Korea’s tax burden approaches 30 percent. Still, we are worried about falling sick or scared of losing our jobs.
Honestly speaking, I am concerned about the present administration’s passion for reform along with its disregard for all procedures. Flexibility that takes side effects into consideration is required.
* The writer is a professor of sociology at Seoul National University. Translation by the JoongAng Daily staff.
by Song Ho-keun