377.9 trillion won was paid in taxes last year

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377.9 trillion won was paid in taxes last year

Korea collected 377.9 trillion won ($332.6 billion) in local and central government taxes last year, official data showed Sunday, with the tax-to-gross domestic product (GDP) ratio rising sharply as more corporate taxes were collected on companies’ stronger earnings.

According to the data from the Ministry of Economy and Finance, the Ministry of the Interior and Safety, and the central bank, Korea’s combined revenue in taxes rose 9.3 percent on year in 2018.

The Finance Ministry said that central government taxes collected last year came to 293.6 trillion won, up 28.2 trillion won from a year earlier. Local taxes also rose 3.9 trillion won to reach 84.3 trillion won.

The tax-to-GDP ratio came to 21.2 percent last year, up 1.2 percentage points from 2017. It marked the sharpest growth since a 1.6 percentage-point on-year rise posted in 2000. The Bank of Korea said Korea’s GDP came to 1,782 trillion won in 2018.

The ratio, which reached 19.6 percent in 2007, earlier decreased following the Lee Myung-bak administration’s efforts to cut the tax burden, reaching 17.9 percent in 2010. The figure later rebounded to 19.4 percent in 2016 and reached the 20-percent mark in 2017.

In 2018, the amount of collected central government tax rose 10.6 percent on year, mainly attributable to more corporate taxes following the boom of Korea’s chip industry. The increased trade of properties last year ahead of a new taxation policy on those owning more than one house also resulted in more tax revenue.

The government said while the tax-to-GDP ratio increased on year in 2018, it does not mean that individuals had to pay higher income taxes. The government explained that although it collected 2.3 trillion won more in income taxes, it was attributable to the increase of average income.

“As the government did not roll out a tax hike, the tax-to-GDP ratio jumped due to sound performances of corporations,” said Park Ki-Baeg, a professor at the University of Seoul.

“Although [the ratio] is relatively low compared with other members of the Organization for Economic Cooperation and Development, the government needs to adjust the ratio as a sudden rise will burden companies and individuals.”

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