"Increase Rate of South Korean Citizens' Tax Burden Rises Fastest Among OECD Countries"

[Asia Economy Reporter Suyeon Woo] The speed of increase in tax burden on South Korean citizens was found to be the fastest among 37 Organisation for Economic Co-operation and Development (OECD) countries.

On the 2nd, the Korea Economic Research Institute surveyed the recent 5-year (2015?2019) trend of national burden rates among OECD countries. South Korea's national burden rate rose from 23.7% in 2015 to 27.4% in 2019, an increase of 3.7 percentage points, marking the largest rise among the 37 OECD countries. This exceeds seven times the average change of 0.5 percentage points in national burden rates among the 37 OECD countries during the same period.

The national burden rate is an indicator that comprehensively measures the level of burden on citizens related to taxes, defined as the proportion of total taxes such as national and local taxes plus social security contributions of quasi-tax nature in nominal Gross Domestic Product (GDP).

When comparing and analyzing the increase in South Korea’s national burden rate in 5-year intervals, the rise over the recent 5 years was the largest since statistics began in 1990, showing a significant gap compared to the previous 5 years (2011?2015) increase of 0.5 percentage points.

Source=Korea Economic Research Institute

Examining the causes of the sharp increase in the national burden rate, a significant factor was the substantial rise in the tax revenue share of corporate tax and social security contributions. Compared to 2015, the increase in the share of these tax revenues relative to nominal GDP in 2019 was 1.2 percentage points for corporate tax, 1.0 percentage point for social security contributions, 0.7 percentage points for income tax, 0.4 percentage points for consumption tax, 0.2 percentage points for property tax, and 0.1 percentage points for others.

Comparing the increase by tax base among the 37 OECD countries, South Korea ranked 2nd in corporate tax growth rate, 2nd in property tax, 5th in social security contributions, 7th in income tax, and 8th in consumption tax. This indicates a steep increase in the burden of corporate tax, property tax, and social security contributions of quasi-tax nature. The Korea Economic Research Institute interpreted that the rise in the top corporate tax rate and the increase in holding tax burden due to rising real estate prices influenced the increase in corporate and property tax burden rates.

Over the recent 5 years, the burden rate for social security contributions of quasi-tax nature, such as social insurance premiums, also ranked 5th among OECD countries, further increasing the burden on citizens. The Korea Economic Research Institute pointed out that the sharp increase in health insurance premiums, which account for the largest portion (42.2%) of domestic social security contributions, is a major factor expanding the quasi-tax burden on citizens. Health insurance premiums recorded an average annual growth rate of 7.5% over the recent 5 years, showing the steepest increase among the four major insurances (National Pension, Health, Employment, and Industrial Accident Insurance).

Choo Kwang-ho, Director of Economic Policy at the Korea Economic Research Institute, emphasized, "A rapid increase in tax burden can lead to a decline in private economic vitality, so instead of excessive tax rate hikes, priority should be given to restructuring expenditure to alleviate the burden on citizens."

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