Amend the tax codeOne out of two salary-earners and companies in Korea do not pay their income taxes. According to the National Tax Service, 8.1 million or 46.8 percent of 17.33 million individuals who reported their annual wages to the tax office in 2015 had not paid their dues on earned income. The rate is hard to find anywhere in the world that imposes fair tax liability. Exemption rate on personal income tax rarely goes above 20 percent. The rate is 32.9 percent in the United States.
Moreover, of 590,000 companies registered with the tax office, 47.1 percent have underpaid their taxes. The fact that the top 1 percent income-bracket in our corporate sector accounts for 75.9 percent of our total corporate tax revenue underscores the vulnerability and imbalance in the Korean economy. It suggests tax revenue from companies is too reliant on a few corporate entities and many companies cannot even afford taxes or are not earning enough.
The incoming administration must address the dysfunction and irregularities in the tax code. Personal income tax also should be based on fair taxation principles through low rates and broad levy. It is unfair to demand greater taxes from high earners. Currently the top 1 percent salary earners account for 32.6 percent of personal tax revenue and, by extension, the top 10 percent salary earners account for 75.9 percent of the revenue. The share of income tax contribution to the gross domestic product is at 40 percent of the levels of developed countries.
The economy cannot be sustained through such unbalanced tax systems. More revenue is needed to finance increased welfare cost against rapidly aging society. Various deduction and exemption provisions must be corrected and the surtax criteria should be tightened. Corporate tax levies should be rationalized by strengthening competitiveness of small and mid-sized companies.
The government must ease regulations and realign the industry structure to ensure balanced growth in greater number of companies. The tax code should be one of the first things the incoming administration tackle.
JoongAng Ilbo, April 6, Page 30