Tax Reduction System Nearing Sunset Extended by 90%... Total Scale of 6.4 Trillion Won

[Sejong=Asia Economy Reporter Son Seonhee] The government has decided to extend about 90% of the tax exemption and reduction systems that were scheduled to end by the end of this year. The tax expenditures will increase by the extension period, with the total amount exceeding 6 trillion won. In particular, the reduction amounts for the Employment Increase Tax Credit, indirect tax exemption on petroleum products for agriculture, forestry, and fisheries, and the special VAT input tax credit for recycled waste resources each exceed 1 trillion won.

According to the Ministry of Economy and Finance on the 1st, the government announced in the 2021 tax law amendment that among the 86 tax exemption and reduction systems set to expire this year, 54 will have their application periods extended and 23 will be redesigned. This postpones the expiration of 77 (89.5%) out of the 86 tax exemption and reduction systems.

According to the 2021 Tax Expenditure Budget, the total amount of reductions for the 77 systems this year (estimated) is 6.4114 trillion won, excluding some systems whose reduction amounts are difficult to estimate. The reduction amount for the 54 systems whose application periods are extended without changes is 4.2926 trillion won, and for the 23 systems that are redesigned and extended, it is 2.1188 trillion won. The total reduction amount was 5.1818 trillion won in 2019 (actual) and 6.3261 trillion won in 2020 (estimated), showing a steady increase in tax expenditure scale each year.

Among the 86 tax exemption and reduction systems scheduled to expire this year, only 9 systems will end, representing an expiration rate of just 10.5%. The expiration rates were 20.6% (7 out of 34 systems) in 2019 and 18.5% (10 out of 54 systems) in 2020, so this year’s rate is even lower.

Among the tax exemption and reduction systems with extended expiration, the system with the largest reduction amount this year according to the Tax Expenditure Budget is the Employment Increase Tax Credit, whose application period has been extended until the end of 2024, amounting to 1.3103 trillion won. It has been increasing annually, with 731.7 billion won in 2019 and 1.2813 trillion won in 2020.

The indirect tax exemption on petroleum products for agriculture, forestry, and fisheries is also estimated at 1.1359 trillion won. This system’s application period was extended by two years until the end of 2023 without redesign.

The special VAT input tax credit for recycled waste resources followed with a reduction amount of 1.0497 trillion won. Its application period was also extended by two years until the end of 2023.

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