30% of Tax Expenditures Such as Tax Exemptions and Income Deductions Are Benefited by High-Income Earners

[Asia Economy Reporter Kwangho Lee] It has been found that high-income earners received about 30% of government tax expenditures such as tax exemptions and income deductions.

According to data on the 'Status of Tax Expenditure Allocation by Income Bracket over the Past 5 Years' submitted by the Ministry of Strategy and Finance to Lee Kwang-jae, a member of the National Assembly's Planning and Finance Committee from the Democratic Party of Korea, out of the total government tax expenditures of 31.5589 trillion KRW last year, 9.5605 trillion KRW went to high-income earners.

Tax expenditures are an indirect form of support that benefits the public by not collecting taxes that the government is supposed to receive. They take forms such as tax exemptions, tax credits or reductions, and income deductions.

Tax expenditures allocated to middle- and low-income earners amounted to 21.9984 trillion KRW, accounting for 69.7% of the total.

When determining the allocation of tax expenditures per individual, the government classifies vulnerable groups such as workers and farmers/fishermen with annual income below a certain amount, the elderly, and the disabled as middle- and low-income earners, while others are classified as high-income earners.

In 2019, the threshold separating high-income earners from middle- and low-income earners was an annual income of 67 million KRW.

The reason tax expenditures provided by the government go to high-income earners is that a significant portion of tax expenditures such as tax exemptions, tax credits or reductions, and income deductions do not specify income levels.

For example, income deductions or tax credits related to insurance premiums, credit cards, medical expenses, and education expenses are tax expenditures that high-income earners can also receive.

However, the proportion of government tax expenditures received by high-income earners significantly declined last year.

The share of tax expenditures allocated to high-income earners was relatively steady at 35.3% in 2015, 34.6% in 2016, 34.4% in 2017, and 35.0% in 2018, but dropped to 30.3% last year.

This was due to an increase of 3.9 trillion KRW in earned income and child tax credits and 1.1 trillion KRW in employment support tax benefits last year.

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