"Corporate Profits Decline While Quasi-Taxes Increase, Burden Must Be Reduced"

[Asia Economy Reporter Changhwan Lee] While the net income of domestic companies has decreased, the burden of quasi-taxes has increased. Amidst the difficult economic situation, companies are facing growing financial burdens, and the general public's quasi-tax burden is also rising, highlighting the need for measures to alleviate this.

On the 5th, the Federation of Korean Industries (FKI) announced that the quasi-taxes primarily borne by companies amounted to approximately 62.9 trillion KRW in 2018, reaching 88.7% of the total corporate tax amount of 70.9 trillion KRW in the same year.

Quasi-taxes refer to charges that are not taxes but must be paid like taxes, such as health insurance, national pension, fines, and administrative fees. Among these, the narrow definition of quasi-taxes excludes social insurance subscriber contributions, usage fees, commissions, and fines from the broad quasi-taxes, and mostly consists of the burden on companies.

In 2018, narrow quasi-taxes increased by about 8% compared to the previous year's 58.3 trillion KRW, marking the highest level in three years. On the other hand, companies' net income for the year was 161.3 trillion KRW in 2018, down 14.5% from the previous year.

The broad quasi-taxes, borne by the entire population including companies, amounted to approximately 147.6 trillion KRW, which is 39.1% of the total tax amount of 377.9 trillion KRW. Broad quasi-taxes increased by 6.5% compared to the previous year. The FKI emphasized that this indicates that companies and citizens bear a significant financial burden from quasi-taxes in addition to taxes.

The FKI explained that an investigation into the ratio of broad quasi-taxes to nominal Gross Domestic Product (GDP) over the past 10 years showed a continuous upward trend. The ratio of broad quasi-taxes to nominal GDP was 6.4% in 2010, the lowest in the past decade, and steadily rose to 7.8% in 2018.

Looking at the composition ratio of quasi-taxes in 2018, the total health insurance premium was 53.9 trillion KRW, accounting for 36.5% of broad quasi-taxes. The national pension was 41.9 trillion KRW, accounting for 28.4%, and thus the total amount of the four major insurances was about 116.8 trillion KRW, making up 79.1% of quasi-taxes. Various other charges accounted for 14.2%, followed by fines, donations, and others.

Analyzing the increase in broad quasi-taxes in 2018 (9 trillion KRW), health insurance increased by 3.5 trillion KRW and the national pension by 2.3 trillion KRW. When analyzing the increase in narrow quasi-taxes (4.6 trillion KRW), health insurance increased by 1.7 trillion KRW and the national pension by 1 trillion KRW. The increase in the four major insurance premiums accounted for 94.7% of the increase in narrow quasi-taxes, revealing that the rise in the four major insurance premiums is the main cause of the increase in quasi-taxes.

Yoo Hwan-ik, head of the Corporate Policy Office at the FKI, stated, "The continuous increase in quasi-taxes is a heavy burden for both the public and companies," and emphasized, "Special measures are needed to ease the quasi-tax burden to overcome the economic recession caused by COVID-19."

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