Tax bills shoot up for wealthy and big businesses

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Tax bills shoot up for wealthy and big businesses

Conglomerates and top earners will pay a combined 1 trillion won ($941 million) in taxes over the next five years as the National Assembly has recently approved a new tax reform bill.

The reform means large businesses will pay an extra 137 billion won in corporate taxes.

The Ministry of Strategy and Finance said yesterday the government will raise around 1.9 trillion won in total tax revenue over the next five years under the revised bill. This is higher than 1.6 trillion won initially planned by the Finance Ministry.

This year alone, about 446 billion won is expected to be collected.

Lawmakers increased the total tax revenue by around 290 billion won with a solid aim of collecting more from the wealthy.

They raised the minimum corporate tax rate for businesses with sales over 100 billion won from the current 14 percent to 16 percent. The Finance Ministry previously planned to inch up the rate to 15 percent.

The rate for companies whose sales stay between 10 billion won and 100 billion won is 12 percent, up from 11 percent.

High-income earners will also face higher income tax rates. The lowest tax rate for the country’s top earners has been raised to 45 percent from the current 35 percent. This would help the government rake in about 140 billion won in more tax revenue.

Special income tax credits for the wealthy will also have a ceiling, preventing the rich from getting too many tax credits. The largest amount of deductible tax will not exceed 25 million won for the rich. This would add 90 billion won more to government coffers.

The amended bill also includes tax credits for taxi fees when paid with credit or debit cards as taxis are now legally categorized as public transportation.

The government’s initial plan to impose an additional 20 percent taxation on consumption of luxury bags priced over 2 million won will be implemented from 2014 with a one-year delay.

Consumers would better use cash more than credit cards as the tax deduction for cash receipts has been increased to 30 percent from the current 20 percent.

The rate for credit cards has been lowered to 15 percent from 20 percent, which is part of the government’s efforts to tame rising household debt triggered by increasing credit card use. Capital gains taxes on multiple home owners will be raised from 2014 back to between 50 and 60 percent, up from 6 to 38 percent at present.

By Song Su-hyun [ssh@joongang.co.kr]

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