DP seeks to raise income taxes on the wealthy

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DP seeks to raise income taxes on the wealthy

Published: 06 Jun. 2017, 20:01

The ruling party is taking steps to raise income taxes on the wealthiest, as President Moon Jae-in promised to do on the campaign trail.

Democratic Party lawmaker Kim Chung-woo on Tuesday said he has co-authored a bill with 10 of his fellow party members, where the current income tax on the wealthiest will be raised from 40 percent for those who earn 500 million won ($446,750) or more to 42 percent on those who earn 300 million won and more.

The higher tax on the nation’s top tier is targeted at creating the necessary financial support for the government.

“Demands for fiscal spending have been increasing considering increases in welfare and other things like defense spending,” said Kim. “For the last 10 years between 2008 and 2017, [the government] has been designing a deficit budget due to the lack of tax collections to fulfill this growing demand on government spending.”

He also said an aggressive effort in securing taxes is especially important to support the government goal of creating jobs and enhancing education, but also to further strengthen one of the tax’s functions, which is to achieve an equal distribution of income.

“Realizing noblesse oblige would contribute greatly in creating a social culture where the top income earners are respected,” Kim said.

Moon’s nominee for Finance Minister Kim Dong-yeon hinted at a tax hike especially for the wealthiest on Monday.

“Korea can afford a tax increase as it has a lower ratio of tax burden to the gross domestic product (GDP) than other member countries of the Organization for Economic Cooperation and Development (OECD),” incoming Finance Minister Kim said in a report to the parliament before his confirmation hearing Wednesday. “But I think it should be more prudent in actually increasing tax rates at large.”

The comment was based on a recent study that found Korea’s tax burden was 18 percent of its GDP in 2014, while the average for OECD member countries was 25.1 percent.

If the bill passes through the government is expected to collect an additional 1.2 trillion won.

According to the National Assembly Budget Office, 0.1 percent, or 19,683 people as of 2015, would be entering the 300 million won taxable income bracket among labor workers, while 0.7 percent, or 44,860 people, would go into the same category for comprehensive income.

In the first quarter of this year the government collected nearly 70 trillion won, which is 5.9 trillion won more than the same period last year.

BY LEE HO-JEONG [lee.hojeong@joongang.co.kr]