[Interview] OECD Secretary-General: "Korean Tax Reform Needed... Must Promote Women's Return to Labor Market" (Comprehensive)

KDI 50th Anniversary International Conference
Angel Gurr?a Secretary-General - Written Interview with Korean Media

"Disaster Relief Payments Are More Efficient as 'Targeted Support'"

Angel Gurr?a, Secretary-General of the Organisation for Economic Co-operation and Development (OECD), sent a congratulatory message via video at the KDI 50th Anniversary International Conference held on the 17th. Secretary-General Gurr?a conducted a written interview with Korean media.

[Asia Economy Reporter Kim Eunbyeol] The Organisation for Economic Co-operation and Development (OECD) has pointed out the need for smart tax reform in South Korea amid declining tax revenues due to low birth rates and aging population, coupled with increased fiscal spending caused by the COVID-19 pandemic.

Angel Gurr?a, Secretary-General of the OECD, said in an interview with Korean media on the 17th, "With a shrinking economically active population in the labor market and rising pension, health, and long-term care costs due to aging, public finances will face upward pressure. It will be difficult to maintain the current low level of tax revenue relative to Gross Domestic Product (GDP), so 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 forecasted, "Personal Income Tax (PIT) and Social Security Contributions (SSC) revenues will decline, putting downward pressure on tax revenues. Additionally, since pension benefits are lower than wages earned during economic activity, tax revenues will decrease."

He viewed South Korea's approach of enhancing tax system efficiency by broadening the tax base instead of raising statutory tax rates as an interesting policy approach. However, he pointed out that future tax reforms should prioritize increasing labor market participation, especially women's participation, as a key agenda in tax policy. He also identified reviewing the current tax system considering economic digitalization and strengthening the role of environmental taxes to address climate change as priority tasks for tax reform.

He also emphasized the need for government efforts to reduce the risk of the globally emerging "K-shaped recovery." Gurr?a said, "COVID-19 has exacerbated existing problems in the South Korean labor market," mentioning wage gaps between regular and non-regular workers, and job vulnerabilities among women, the elderly, and youth. He stated, "The South Korean government must continue efforts to enhance the inclusiveness of the social protection system to reduce disparities between different labor market segments and income gaps. Specific policies for marginalized vulnerable groups are needed, 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." As of 2019, South Korea recorded the highest gender wage gap among OECD member countries at 32.5%. 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 targeted support focused on affected groups is effective. Gurr?a stated, "Disaster relief payments targeted at the groups most in need can generate a large multiplier effect and significantly boost private consumption. However, reaching consensus on who should be included as beneficiaries and how much support is needed remains a challenge." He did not specify the efficient level of inclusion for support recipients.

Gurr?a also welcomed the Moon Jae-in administration's announcement of the "2050 Carbon Neutrality" goal and its participation in the OECD countries' efforts. He said, "The overall social cost to achieve net-zero carbon emissions is a reasonable 1-2% of GDP. Some of the costs can be offset by welfare benefits gained from continuously reducing air pollution."

Among the possible methods for South Korea to achieve its emission targets, he highlighted the "carbon pricing system," noting it is very effective in promoting decarbonization. He said, "(Carbon pricing) encourages emitters to find and use economically efficient ways to reduce emissions and also reduces demand for carbon-intensive fuels. If the government firmly commits to carbon pricing, it can assure investors that the government is investing in the use and development of low-carbon and zero-carbon energy technologies," expressing a positive view. Additionally, Gurr?a welcomed the South Korean government's pledge not to build new coal power plants as a welcome measure.

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