Enraging taxpayersThe news that the government is mulling shaving deductible taxes from individuals’ annual credit card spending has angered salaried workers. The tax rewards on credit card-financed spending started in 1999 to prevent tax evasion by small businesses. The temporary tax refund program was originally designed as a sunset provision that automatically terminates after a certain period. But it was has periodically been extended, serving as a kind of annual bonus for salaried workers. The government claims the time has come to phase out the benefit.
Yet the removal of the tax return program that lasted for nearly 20 years would come more as a tax increase for salaried employees. Nearly 9.68 million of them filed for deductions and refunds on their credit card expense reports for last year. The Korea Taxpayers’ Association estimates that a worker with an annual salary of 50 million won ($44,092) would be charged 500,000 won in extra tax. Salaried employees who are most exposed to taxes will certainly feel like they are being ripped off.
The move also raises suspicions that the plan originated from the push for Zero Pay, a government-backed direct payment system for consumers and merchants. While reducing the deductible scope for credit cards, tax authorities are thinking about offering a 40-percent deduction for Zero Pay spending. The new direct payment has been shunned by consumers, with its usage only amounting to 0.0003 percent of credit card use in January. How many consumers will understand the reduced benefits for their use of convenient credit cards and increased benefits for a payment system they are unfamiliar with?
In 2015, the Park Geun-hye administration created major backlash with taxpayers after it modified the income tax code for salary earners. The Moon Jae-in administration’s casual tax policy could also backfire. It must explain the specific design of the plan and first seek public understanding. Before resorting to easy tax collection from salaried workers, it must study tax spending loopholes caused by generous budgetary projects, reckless welfare benefits and populist policies.
JoongAng Ilbo, March 11, Page 30