By Kim Jae-kyoung
Staff Reporter



Korean salaried workers will shoulder a much higher tax burden next year as their income taxes will increase over 12 percent amid slow income growth.
The Ministry of Finance and Economy (MOFE) said on Monday that income taxes will reach 12.03 trillion won ($12 million) next year, up 12.4 percent from 10.73 trillion won this year and twice the 6.07 trillion won in 2000.

As a result, one salaried worker will have to pay 1.53 million won in labor income taxes in the coming year given the number of taxable salaried workers is expected to reach 7.86 million next year,.

The figure is up 10 percent from the 1.39 million won paid this year when the number of taxable wage earners is estimated at 7.71 million. The number of salaried workers has increased on average 2 to 4 percent per year over the last five years.

The heavier tax burden reflects the government’s efforts to secure more sources of tax revenue by reducing tax exemption items and tax incentives for wage earners.

What is of concern is that the increase in the earned income tax has come amid stalled national income gains.

The nation’s gross national income (GNI) posted zero growth in the second quarter, meaning the nation saw no rise in real purchasing power in those three months from a year earlier.

It was the lowest since a 6.1 percent fall in the fourth quarter of 1998, when the nation was hit by a devastating currency crisis.

More worrisome is that earned income taxes have been rising at a much faster pace than the country’s total national taxes.

The national taxes are expected to rise to 136 trillion won next year, up 46.3 percent from 92.9 trillion won in 2000, while the earned income taxes are likely to reach 12.03 trillion won, nearly doubling the 677 billion won six years ago.

Consequently, the proportion of earned income taxes compared to total national taxes are expected to rise to 8.8 percent next year, up 0.3 of a percentage point from this year and 2.3 percentage points from 2000.

With the government’s efforts to collect more taxes to make up for the lack of tax revenue, Koreans faced a record burden of taxes and social security contributions last year.

The MOFE said that a person paid a total of 3.98 million won in taxes and social security contributions last year, the highest level in history. It is expected to reach 4.35 million won this year.

``It is natural that people’s taxes and social security contributions increase during the course of entering into an advanced economy to strengthen the social welfare system,’’ a market analyst said.

``Nevertheless, the growth pace of taxes and social security contributions surpassing that of the national income is worrisome,’’ he added. ``If this trend continues, the burden will grow at an accelerating pace.’’

The amount of tax revenue shortage is forecast to reach around 4.4 trillion won this year due to a sluggish domestic economy, according to the Ministry of Planning and Budget.

kjk@koreatimes.co.kr