Tax incentives make Koreans biggest card chargersKoreans’ use of plastic to make purchases is outstripping other advanced economies.
According to the Bank of Korea yesterday, credit card use per capita in Korea as of 2011 was 129.7 swipes per per year.
That’s the most among the 15 member countries of the Committee on Payment and Settlement System (CPSS) under the Bank for International Settlements (BIS).
Canada was second with 89.6 swipes while the U.S. took third place with 77.9.
Until 2007, Korea credit card swipes per capita trailed behind the U.S. and Canada. At that time, Americans used their cards 78.4 times per year and Canadians 71.8 times. Koreans were third with 68.3 swipes.
In 2008, Korea exceeded 81.3 swipes and the gap has widened ever since.
In 1999 the government adopted a tax policy encouraging credit card spending to crack down on the black economy and tax evasion but also to encourage consumption. The government encouraged credit card payments for the smallest purchases down to a box of gum.
Today Koreans use credit cards to pay bus and taxi fares.
However, with fears of mounting household debts threatening the overall economy, the government since last year has been trying to ease the use of credit cards and encourage the use of debit cards.
One of the biggest changes was its downsizing of the tax break on purchases made on credit cards.
Previously a person could get a 20 percent refund on their tax bill on the spending made on credit cards when that spending exceeded 20 percent of their total income. Now the refund is 10 percent.
BY LEE HO-JEONG [firstname.lastname@example.org]
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