Tax revision a hit to donations

A Democratic Party lawmaker and dozens of civic groups yesterday urged the legislature to reverse a recent revision to the law governing tax exemptions, saying the measure will only discourage people from donating to charities.

In January, the National Assembly approved revisions to the Restriction of Tax Reduction and Exemption Act, introducing a ceiling on tax-deductible donations on income tax returns. The total tax deductions in eight areas, including education, insurance and medical fees as well as donations, were capped at 25 million won ($22,050). Donations that exceed that amount will no longer be exempt from taxation.

Along with 90 civic groups, including the Beautiful Foundation, Civil Society Organizations Network and Korea Green Foundation, Representative Won Hye-young from the Democratic Party yesterday held a press conference and criticized the measure.

“It threw cold water on our society’s efforts to encourage charitable donations,” Won said. “It is an extremely undesirable change. The people who used to made big donations are moving to curtail the amounts because they worry that their tax payments will go up if they keep up with the usual amounts.”

He also said the situation will grow even worse as many more donors will realize early next year that their contributions were not tax deductible when they file records.

“Differently from the government’s original intention to secure larger funds for welfare programs, the lawmakers failed to have a proper review on how it will affect the culture of donations in our society,” said Lee Si-jae, a co-head of the Civil Society Organizations Network. “Eventually, it will bring about more negative impacts to the society.”

Other civic group representatives who attended the press conference said their projects are in danger because of the prospect of less donations being made this year. They said donors were already discouraged from making contributions.

“Our projects are on music lessons, education and bus transportation programs for children,” said Yu Won-seon, secretary general of the charity Walking With Us Children’s Foundation. “They are expensive projects which require a large budget for each child. The projects were so far possible because we had a donor who made a large contribution until now, but recently the donor withheld contributions to wait for the change in the law.”

A contributor also spoke at the press conference to point out problems with the revised system. Bae Yang-sook, a senior Samsung Life Insurance financial consultant, said she has donated about 30 percent of her income to various philanthropic groups but she is now concerned about her donations and tax payments for this year.

“Let’s say I donate 200 million won this year,” she said. “That means I will have to pay 80 million won in tax for the donations. It is really regretful because the government should encourage people to make more charitable contributions.”

She said donations are important because they find the gaps in society that the government fails to find and fills them.

In February, Representative Won submitted a bill to the legislature to reverse the change. He said the bill needs to be approved quickly to allow donors to continue to benefit from the tax deduction system and urged the National Assembly to review his bill as soon as possible.

BY SER MYO-JA [myoja@joongang.co.kr]