Food and Accommodation Expense Income Deduction Increased Up to 80%... Self-Employed Tax Payment Extended Until August

Injecting 17.7 Trillion Won to Revitalize Domestic Demand

[Image source=Yonhap News]

[Asia Economy Reporter Hwang Yoon-joo] The government is pushing forward measures to ease the tax burden on small and medium-sized enterprises and individual business owners whose sales have sharply declined due to the novel coronavirus disease (COVID-19) crisis, and to increase consumption in affected industries. To this end, it has decided to invest 17.7 trillion won.

On the 8th, the government held the 4th Emergency Economic Meeting and announced the "Domestic Demand Supplement Plan through Prepayment and Pre-purchase," which includes these measures.

First, to increase consumption that has contracted since the COVID-19 outbreak, the government raised the income deduction rates for credit card usage. The existing 15% deduction rate for credit card usage will be temporarily increased to 30% for usage from March to June. The deduction rate for cash receipts and debit card usage will be raised from 30% to 60%, and for traditional markets and public transportation usage, from 40% to 80%.

Additional support will be provided for "COVID-19 affected industries" such as food and lodging, tourism, performance-related businesses, and passenger transportation. For credit card, cash receipt, and debit card usage in these affected industries from April to June, a uniform deduction rate of 80% will be applied.

Accordingly, the income deduction benefits for credit card, debit card, and cash receipt usage exceeding 25% of total annual salary will increase compared to last year. However, the annual card usage deduction limit (2 million to 3 million won depending on salary) will be maintained.

The tax revenue loss due to this measure is expected to be less than 100 billion won. Last month, it was estimated that tax reductions would amount to about 200 billion won by increasing deduction benefits regardless of industry, but this time, by focusing benefits on COVID-19 affected industries, the tax reduction is expected to be about half.

However, there are criticisms that such measures to promote consumption in tourism and passenger transportation industries, while the COVID-19 crisis has not ended, contradict the "social distancing" policy.

Regarding this, Deputy Prime Minister and Minister of Strategy and Finance Hong Nam-ki said, "We expect these measures to alleviate various difficulties during the social distancing period to some extent and judged that demand creation is necessary to prepare for future consumption rebound."

The Blue House has held four emergency economic meetings since the 19th of last month to overcome the economic crisis caused by COVID-19. Each time, new measures have been announced, increasing the required budget to a total of 163 trillion won. With national debt reaching an all-time high and tax revenues continuously decreasing, there is interest in whether the government can properly secure the necessary funds.

Measures to reduce the tax burden on individual business owners have also been introduced. The National Tax Service decided to extend the payment deadline by three months ex officio for all approximately 7 million individual business owners subject to this year's comprehensive income tax and individual local income tax filings, in cooperation with local governments.

Individuals with income other than earned income must pay comprehensive income tax and local income tax based on comprehensive income tax by June 1, but this year, taxes can be paid until August 31. However, the filing of comprehensive income tax and individual local income tax must still be completed by June 1 as originally scheduled.

Support measures for borrowers facing delinquency risks have also been prepared. For delinquent claims of small business owners affected by COVID-19, the Korea Asset Management Corporation (KAMCO) will purchase up to 2 trillion won and arrange debt adjustments such as repayment deferrals.

The government also plans to accelerate public sector spending. It will prepay as much as possible for supplies, consumables, business promotion expenses, and airline ticket purchases used by the government and public institutions, and advance construction investments to create demand exceeding 3.3 trillion won.

This content was produced with the assistance of AI translation services.