[Interview] OECD Secretary-General: "Korea Needs Smart Tax Reform... Maintaining Low Tax Revenue Ratio Is Difficult"

To Mitigate Shock of Korea's K-Shaped Recovery, Promote Women's Return to the Labor Market

Angel Gurr?a, Secretary-General of the Organisation for Economic Co-operation and Development (OECD)
[Photo by Reuters]

[Asia Economy Reporter Kim Eunbyeol] Amid increasing fiscal expenditures and declining tax revenues due to the COVID-19 pandemic, the Organisation for Economic Co-operation and Development (OECD) has pointed out the need for smart tax reform in South Korea.

Angel Gurr?a, Secretary-General of the OECD, said in an interview with Korean media on the 17th, "As the economically active population in the labor market decreases and aging leads to increased pension, health, and long-term care costs, public finances will face upward adjustment pressures," adding, "It seems difficult to maintain the current low level of tax revenue relative to Gross Domestic Product (GDP), and smart tax reform may be necessary."

As of 2018, South Korea's tax revenue as a percentage of GDP was 26.8%, significantly lower than the OECD average of 33.9%.

Secretary-General Gurr?a stated, "Improving the efficiency of South Korea's tax system by broadening the tax base instead of raising statutory tax rates appears to be an interesting policy approach," and added, "Partially shifting the tax base to taxes that are less harmful to economic growth while ensuring that the design of the tax system itself guarantees inclusiveness and fairness is possible."

He also pointed out that tax reform measures to increase labor market participation, especially female participation, should be a priority agenda in tax policy. Considering economic digitalization, reviewing the current tax system and strengthening the role of environmental taxes to address climate change can also be prioritized in tax reform.

He emphasized the need for government efforts to resolve the risk of a K-shaped recovery caused by the COVID-19 crisis. Secretary-General Gurr?a said, "The South Korean government should continue efforts to enhance the inclusiveness of the social protection system to reduce disparities between different segments of the labor market and income gaps," and added, "Specific policies for marginalized vulnerable groups, such as promoting the return of career-interrupted women to the labor market and expanding vocational training opportunities for more youth and low-skilled elderly workers, are also necessary." As of 2019, South Korea's gender wage gap was 32.5%, the highest among OECD member countries. The male labor participation rate is 74%, while the female labor participation rate is only 53%.

Regarding the controversial fourth round of disaster relief payments domestically, he said that support focused on affected groups is effective. Secretary-General Gurr?a stated, "Disaster relief payments targeted at the groups most in need can generate a large multiplier effect and significantly stimulate private consumption," but added, "However, reaching consensus on who should be included as beneficiaries and how much support is needed remains a challenge."

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