Opposition warns of ‘tax bomb’

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Opposition warns of ‘tax bomb’

After the ruling Democratic Party proposed hikes in taxes on the wealthy and big companies over the weekend, opposition parties called it a “tax bomb.”

The Democratic Party proposed raising the 22 percent corporate tax rate for companies with 200 billion won ($179.4 million) or more in revenues to 25 percent.

Individuals making 500 million won or more per year would pay 42 percent income tax, up from the current 40 percent rate.

The party said the changes would only affect the “superrich,” not the average Korean.

Korea has only 116 companies with revenues above 200 billion won - 0.019 percent of all companies in the country.

Individuals who earn more than 500 million won a year number 40,000, or 0.08 percent of the total population, the Democratic Party argued.

“There will be no increased taxes for low and mid-income households or small and mid-size firms,” said Je Youn-kyung, the Democratic Party’s spokespersons, in a press release on Sunday.

“We promise that our party will work to allow the people to become owners of the country.”

Party floor leader Woo Won-sik said the government should focus on fixing the current taxation system, which has gone in the wrong direction during the past two conservative administrations.

But three major opposition parties don’t agree with the plan.

“Most major countries in the world are lowering corporate taxes one after the other but Korea is trying to raise corporate and income taxes,” said Liberty Korea Party floor leader Chung Woo-taek on Monday. Chung claimed the government is trying to trick the people by saying the plan will only affect the wealthy. “They said they will expand welfare benefits without raising taxes in the past but I really don’t understand why they changed their tune.”

Kim Tae-heum, a lawmaker from the Liberty Korea Party, said raising taxes on large companies is like punishing them for doing something wrong.

“The government is asking large size companies to invest and hire more but having them pay more taxes will put a damper on those activities,” said Park Joo-sun, the People’s Party’s interim chief.

“The Moon Jae-in administration should clearly state how it will come up with a budget to be spent on its recently announced 100 national tasks and discuss with the people how to configure the tax brackets.”

Chairwoman Lee Hye-hoon of the Bareun Party said the president should apologize to the people for going back on his pledge to not raise taxes. The Blue House said it will be able to proceed with its 5-year economic plans without raising taxes last week. Lee said the new proposals will only raise 3 trillion won to 4 trillion won more than under current rates, far less than the 178 trillion won needed for the 100 national tasks.

Finance Minister Kim Dong-yeon said his ministry has been finalizing new ways to collect taxes and asked politicians to come up with recommendations. A finalized plan will be announced within a month.

BY KIM YOUNG-NAM [kim.youngnam@joongang.co.kr]
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