MoEF "Income Tax Reform Benefits Workers Earning Over 78 Million Won"

[Asia Economy Sejong=Reporter Son Seonhee] The Ministry of Economy and Finance explained on the 22nd that, according to the adjustment of income tax brackets in the '2022 Tax Reform Plan,' the income tax burden will decrease for all workers and self-employed individuals with a taxable income exceeding 12 million won. This aims to correct the misunderstanding that benefits were concentrated only on specific groups due to adjustments being made only in the taxable income bracket up to 50 million won (total salary 78 million won).

Through this reform plan, the Ministry adjusted the upper limit of the taxable income for the two lower income tax brackets from 12 million won to 14 million won, and from 46 million won to 50 million won, respectively.

Since income tax is calculated using a 'progressive tax rate' method for each income bracket, even adjusting only the lower brackets results in actual tax reduction effects applying to all brackets exceeding 12 million won.

For example, a worker with a total salary of 150 million won (taxable income 120 million won) currently pays a total tax of 27.1 million won, calculated by applying tax rates of 6% for the bracket up to 12 million won, 15% for 12 million to 46 million won, 24% for 46 million to 88 million won, and 35% for 88 million to 120 million won.

Reflecting the revised plan, tax rates of 15% and 24% will be applied to the 14 million to 50 million won and 50 million to 88 million won brackets, respectively, resulting in a total tax burden of 26.56 million won, which means an annual tax reduction of 540,000 won. However, to prevent excessive tax cuts for high-income earners, the government applies a reduction of 300,000 won in earned income tax credit for those with total salaries exceeding 120 million won, making the actual tax burden reduction 240,000 won.

In other words, workers with total salaries between 88 million won and 120 million won can also benefit from the tax reduction due to this adjustment of taxable income brackets.

However, those who are below the taxable threshold and have no tax liability, or whose taxable income is 12 million won or less, will not benefit from the bracket adjustment. Instead, the Ministry of Economy and Finance stated that they can receive benefits from other tax reforms, such as doubling the non-taxable meal allowance limit from 100,000 won to 200,000 won and increasing the monthly rent tax credit rate to 15%.

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