Tax pact strives for equitable reform

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Tax pact strives for equitable reform

Lawmakers and government officials yesterday pounded out an agreement on a tax reform plan for next year.

Both sides met in advance of the announcement of the plan Thursday by the Ministry of Strategy and Finance.

Saenuri Party floor leader Choi Kyung-hwan emphasized the importance of balancing the burden on taxpayers from different income classes.

“Tax burdens should be considered reasonable by taxpayers,” Choi said. “While the government aims to revise the tax policy in a way to ease tax burdens for low-income households, it should not pass the burdens on to middle-class households.”

Choi also said there is a need to increase tax cuts not only for small and midsize businesses.

“Past tax reform plans used to be complicated without a clear change in the former government’s tax policy directions,” Choi said. “Since it is going to be the first tax policy of the Park Geun-hye government, the forthcoming plan should carry a clear direction, especially toward revitalizing the economy and helping out the working class.”

Finance Minister Hyun Oh-seok emphasized that the Park government’s goal is to make the country’s tax burden reasonable, normalize the taxation structure and increase the efficiency of tax credits for businesses.

“The tax revision plan for next year has been made based on the government’s major policies with an aim of securing enough tax revenue and ensuring equality in taxation for the general public,” Hyun said.

The 2014 reform plan is expected to include measures to revamp the income tax credit system that currently favors top earners and raise the tax credit for cash use while cutting the rate for credit card use.

According to research by the Korea Institute of Public Finance, a state-run tax policymaking organization, the government intends to expand the earned income tax credit for low income households and introduce a child tax credit.

The finance ministry has decided to rectify the system in a way that makes it more equitable for low-income earners, the institute said at a public hearing in June.

Current law applies tax rates of 6 percent to 38 percent to individuals. If they spend cash, they get a 30 percent tax credit and 15 percent credit when using credit cards. This could be eliminated or altered to minimize the reductions, according to the ministry.

The ministry also is pushing for a new system targeting top earners that cuts the amount a person should pay as income tax instead of using tax credits.

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