The Moon Jae-in administration has announced a plan to raise taxes on large, high-earning companies and wealthy individuals to fund its job-oriented policy initiatives, marking a departure from the two previous conservative governments.
In a tax-related ministerial meeting chaired by Finance Minister Kim Dong-yeon on Wednesday, the government finalized a tax code revision, seeking significant changes for income tax, corporate tax, inheritance tax, and gift tax beginning next year.
The key to the revision is raising taxes on high-income earners and conglomerates while reducing the tax burden on the working class and small businesses and expanding tax support on employment.
Under the plan, the maximum income tax rate, or the rate for those whose annual taxable income exceeds 500 million won, or about 445-thousand U.S. dollars, will be raised to 42 percent, up two percentage points from the current level.
The maximum corporate tax imposed on companies with taxable income exceeding 200 billion won will be raised by three percentage points to 25 percent.
The target income tax rate will be the highest since 1995, while the target corporate tax rate will reach a level not seen for nine years. The changes are expected to affect some 93-thousand high-income earners and 129 large firms.
The government is also seeking to impose higher tax on stocks transferred by large shareholders while beginning to roll back various tax deduction benefits for large firms.
Conversely, the government plans to strengthen taxation to assist its job initiatives, introducing tax benefits for companies recruiting more workers and turning non-regular employees into regular ones.
The tax revision is designed to enhance fair taxation and secure funding for the government’s 100 priority policy tasks, the implementation of which is expected to cost 178 trillion won over the next five years.
Through the revised tax code, over 20 trillion won in additional tax revenue is expected to be collected from high-income earners and corporations through 2022.
Meanwhile, the tax burden will be lowered for those in the low and middle-income brackets by about 220 billion won, and for medium- and small-sized firms by some 600 billion won. The government will submit the tax revision bill to the National Assembly by September 1st but it is expected to be challenged by the opposition.