Hankyung Research Institute: "Insufficient Tax Benefits for Families with Children... Consideration Needed for Marriage Tax Credit and Others"

Korea Economic Research Institute, Report on 'Expanded Tax Benefits to Overcome Low Birthrate'

[Asia Economy Reporter Park Sun-mi] To overcome the serious low birthrate phenomenon, there is a call for expanding effective tax benefits to encourage marriage and childbirth and to reduce the burden of child-rearing.

On the 24th, the Korea Economic Research Institute stated in its report titled "Expansion Plan for Tax Benefits to Overcome Low Birthrate" that despite various low birthrate measures being implemented, South Korea lacks sufficient tax benefits for families with children compared to OECD countries. While the OECD average tax gap difference between two-child single-earner families and single-person households is 10.2 percentage points, South Korea's tax gap difference between two-child single-earner families and single-person households is only 5.0 percentage points.

The fact that the tax gap difference by household type is smaller than the OECD average means that South Korea provides smaller tax benefits to families with children compared to other countries. In countries like Germany and the United States, there is a tax gap difference of 14 to 16 percentage points by household type, offering greater tax benefits to families with children compared to single-person households.

Lim Dong-won, a senior researcher at KERI, argued, "Tax benefits for 'married couples with children' are less than half the OECD average, so these benefits should be expanded to encourage marriage and childbirth," adding, "Without more proactive tax support policies than in the past, there will be little effect."

The report also analyzed that overcoming low birthrate is important for South Korea's future, specifically for raising potential growth rates, and that active and effective tax improvement measures are needed to encourage marriage and childbirth and reduce child-rearing burdens, focusing on expanding tax benefits centered on increasing marriage rates and reducing child-rearing burdens.

Researcher Lim stated, "First, to increase the marriage rate, which is the starting point of low birthrate measures, a marriage tax credit and special exemptions from gift tax on marriage-related expenses should be introduced." He emphasized the need for new and proactive measures such as a tax credit of 1 million KRW per person for workers earning less than 80 million KRW annually upon marriage, and a special exemption of 100 million KRW from gift tax on marriage and child-rearing expenses.

He also said, "To reduce the burden of child-rearing, tax benefits should be expanded, including the N-bun-N-seung system, increased child tax credit amounts, expanded scope of children for income deduction, and increased limits on education expense tax credits, to encourage and incentivize families with multiple children." He stressed, "If the N-bun-N-seung system, which evenly divides tax benefits after summing household members' incomes, is introduced, continuous tax reductions can be received during the child-rearing period, contributing to overcoming the low birthrate phenomenon." He further explained that France increased its birthrate and contributed to population growth by applying the N-bun-N-seung system.

Additionally, he added, "For child tax credits to be effective, the tax credit should more than double with each additional child," and "The child tax credit amount should be significantly increased, and the scope of children for income deduction should be expanded from the current under 20 years old to under 25 years old to better reflect reality."

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