Ruling Party Raises Tax Increase Debate... Realistic Possibility Remains 'Uncertain'

With 'Tax Increase Theory' Circulating
Hong Nam-gi "National Consensus First... Priority on Revising Tax Exemption and Reduction Systems"

Lee Nak-yeon, leader of the Democratic Party of Korea, and Kim Tae-nyeon, floor leader, are attending the Supreme Council meeting held at the National Assembly on the 26th. Photo by Yoon Dong-joo doso7@

[Asia Economy Reporter Jang Sehee] Amid growing concerns over national debt due to expansionary fiscal policy, discussions about tax increases are emerging within the Democratic Party of Korea. As the trend of expanding welfare in response to COVID-19 continues, serious discussions on how to secure funding have begun.

According to the National Assembly on the 28th, Democratic Party lawmaker Lee Sang-min plans to propose a bill next week to establish a special social solidarity tax targeting high-income earners and large corporations. This bill, which would be temporarily applied from 2022 to 2024, aims to collect an additional 3 to 5 trillion won annually from approximately 570,000 high-income earners with post-tax incomes exceeding 100 million won and the top 100 corporations.

Governor Lee Jae-myung stated on Facebook on the 23rd that Korea's welfare is only about half that of the Organization for Economic Cooperation and Development (OECD) countries, and that welfare such as basic income should be expanded through tax increases.

Lee said, "If we demand tax increases from the rich and middle class who do not receive benefits in order to increase support for the poor, it will be impossible due to tax resistance," adding, "If a tax for basic income purposes is collected and distributed equally in full, the overwhelming majority of 80 to 90% who pay taxes would receive more income than they pay, making it easier to gain consent for tax increases."

Kim Boo-kyum, former Minister of the Interior and Safety and a proponent of the basic income system, recently mentioned in a media interview that "to provide a basic income of 300,000 won per person per month, 180 trillion won annually is needed," suggesting the necessity of a 3% increase in value-added tax.

Experts related to the new welfare system led by Representative Lee Nak-yeon also mentioned the need for tax increases. On the 25th, Professor Yoon Hong-sik of Inha University's Department of Social Welfare proposed at a National Assembly lecture on the Innovative Inclusive Nation Future Vision that tax increases should be gradually implemented over four stages during the next 20 years based on public trust and support to secure funding for the universal social protection system of the new welfare system.

Regarding this, Deputy Prime Minister and Minister of Economy and Finance Hong Nam-ki previously stated, "The most important factor regarding tax increases is forming a national consensus," adding, "Tax increases can be realized only if there is public consensus." He also said, "We will first focus on efforts such as reforming tax exemption and reduction systems, strengthening efforts to uncover hidden income, and rationalizing the tax system."

The academic community also holds a cautious stance. Jung Kyu-chul, Director of the Korea Development Institute (KDI), said, "Expanding the tax base should precede raising tax rates," adding, "Since there are many tax-exempt, reduced, and exempted groups, these should be addressed first, and then tax rates can be raised. However, there may be sharp disagreements on which tax items?value-added tax, income tax, corporate tax?should be increased, so public discussion is necessary."

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