[Editorial] Deepening pain from tax and utility fee hikes

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[Editorial] Deepening pain from tax and utility fee hikes

The new year has started tough on the people. After shriveling over a surge in the gas heating bills during an abnormally cold winter, the public fret over the extra strain on their wallets from the spike in various public service charges. While their income is at standstill, consumers grapple with inflation soaring by 5.2 percent in January — and struggling with a 28.3 percent jump in electricity, gas, and water bills — from a year-ago period.

More is to come. Daegu and Ulsan city governments upped the initial taxi rate from 3,300 won ($2.60) to 4,000 won last month. Seoul city followed suit this month by raising the basic taxi fare from 3,800 won to 4,800 won. Seoul is reviewing a spike in bus and subway fares by 300 to 400 won in April. Public transportation fees will rise 20 to 30 percent on average across the nation. Electricity and gas bills are expected to rise further in the second quarter.

Most people are already hard-up from the rapid rise in interest rates. The mortgage lending rate that was at 2 to 3 percent in 2021 has soared above 7 percent. The debt service ratio for borrowers in their 30s has risen to 44.2 percent — and to 41.3 percent for those in their 40s — according to the Bank of Korea (BOK). The data suggests workers are putting up nearly half of their income to pay off their monthly debt dues while spending the rest on services and goods which went up sharply. The BOK estimates households will be burdened with 37 trillion won in extra interest payment due to the sharp rise in interest rates over the past year. The bonus binge bank employees enjoy from their best-year performance in 2022 mostly came from ordinary clients.

Income tax on salary-earners surged 69 percent to 57 trillion won last year from 34 trillion won in 2017, sharply above the 49.2 percent increase in total tax revenue. (Income tax on the self-employed jumped 49.6 percent.) The government claims the rise in labor income tax owes to the increase in the number of employees and salaries. But salary-earners will tell a different story.

The rise in public service charges and interest rates cannot be avoided under current circumstances. The government says our income tax level is not deemed so heavy in international standards. But that cannot be a reason for the government not to pay heed to the hardship of the public. The government must think about how to spread the increase in utility fees and grant temporary tax deductions in light of the extra interest burden. Finding solutions to ease the pain for the people is the duty of the government.
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