Lowering of tax threshold likely to court controversyA tax reform plan that lowers the threshold on taxable profits earned from financial investments is the most controversial among a handful of changes made to the financial, labor and welfare laws starting today.
Investment profits in excess of 20 million won ($18,774) will now be categorized as both taxable and regular income according to the revision, which was drafted by the incumbent Lee Myung-bak administration and later agreed by the ruling and opposition party members at the National Assembly. Until last year, the threshold was set at 40 million won.
Moreover, commission fees paid by local stores to their affiliated credit card companies will now be calculated based on sales. Formerly, they were applied differently depending on sector.
Stores with annual sales of less than 200 million won will now pay 1.5 percent of all their credit card-based transactions as commission fees. This is the lowest rate offered by local credit card issuers. Those that earn more face higher fees.
Such fees emerged as a controversial social issue in 2012, one that was seen as highlighting the gap between large and small businesses.
In 2011, small eateries and diners took to the street in protest against the relatively high rates they had to pay and what they saw as the unfair profits being raked by credit card companies. The movement was ignited by the global spread of Occupy Wall Street.
While the credit card companies were charging smaller commission rates to major retailers, small restaurateurs were paying higher rates of roughly 2 percent, prompting them to call for it to be cut to 1.5 percent.
Since then, the government has been seeking to lower the rates of roughly 1.8 percent and create a more level playing field.
Meanwhile, local exporters that trade with Chinese companies can now pay settlements in the Korean won, while their Chinese partners can pay in the yuan as the government will utilize 64 trillion won from the Korea-China currency swap fund to support both.
This is also part of the two countries’ efforts to internationalize their respective currencies.
Companies with less than 2 trillion won in asset must now announce their sales and operating profits based on consolidated bases, a principle formerly applied only to large companies.
This is part of the government’s move to expand use of a new accounting standard dubbed K-IFRS (Korean International Financial Reporting Standards).
The legal minimum wage has now been raised to 4,860 won an hour, up 6.1 percent from 4,580 won as of the end of last year, according to the Ministry of Employment and Labor.
The minimum rate will be applied universally, including to migrant and foreign workers.
Regardless of size, all companies should pay retirement funds for employees who have been on their payroll for one year or longer.
Employers that hire female breadwinners and people with physical handicaps will now receive double the subsidies. Instead of getting two lump sums a year they will now get four.
Companies engaged in 17 new growth engines, including renewable energy, and those that return from overseas - dubbed “U-turn businesses” - will get 7.2 million won for every person they hire who was unemployed at the time.
With the new government under President-elect Park Guen-hye set to be officially inaugurated in February, a raft of changes is expected in the welfare sector this year. Park made increasing public welfare one of her key campaign pledges.
Regardless of income, households with children aged 3 to 5 will get 220,000 won every month per child to subsidize their private kindergartens costs, or 60,000 won if they send their offspring to public kindergartens.
The government’s Nuri Program, which provided free kindergarten education for all 5-year-olds and free day care for toddlers under 24 months from last year, will be expanded this year, meaning that children’s kindergarten costs will soon be totally covered for those aged 3 and up.
By Song Su-hyun [firstname.lastname@example.org]