"Korea's Donation Culture Among the Lowest Worldwide... Expansion of Private Donations Needed"

South Korea Ranks 88th in Global Giving Culture
Participation Rate Drops from 36% to 21% Over 10 Years

Source: Korea Chamber of Commerce and Industry

[Asia Economy Reporter Jeong Dong-hoon] Amid the global rise of economic polarization and welfare expansion issues, the level of donation culture in South Korea has been continuously declining.

The Korea Chamber of Commerce and Industry stated in its report titled "Institutional Improvement Measures for Revitalizing Public Interest Activities," released on the 18th, that "While the role of the private sector in welfare demand has become increasingly important recently, South Korea's donation culture level has shown a downward trend over the past decade in terms of global ranking, participation rate, and willingness to donate."

First, in the "World Giving Index," which indicates the level of donation culture in various countries, South Korea ranked 88th out of 119 countries last year, remaining in the lower tier, and was nearly last at 110th in 2021 when the COVID-19 pandemic peaked. This ranking is lower than donation-advanced countries such as the United States, Australia, and the United Kingdom, as well as China.

Notably, over the past decade, South Korea's ranking dropped significantly from 57th in 2011 to 88th in 2022, whereas China rapidly rose from 140th to 49th during the same period. The report explained, "While South Korea's donation sentiment was dampened by economic instability caused by the pandemic, China’s rise to the world’s second-largest economy and the spread of the ‘Gongdong Buyu (共同富裕)’ movement, which promotes shared prosperity among its people, have contributed to this trend. The gap between the two countries is likely to widen further."

The UK-based Charities Aid Foundation (CAF) has been publishing the World Giving Index annually since 2010, based on surveys of over 2 million people across about 120 countries, covering ① helping strangers, ② donation experience, and ③ volunteering.

Additionally, donation participation rates and willingness to donate have also shown a declining trend over the past decade. According to Statistics Korea, the donation participation rate among South Koreans aged 13 and above decreased from 36.4% in 2011 to 21.6% in 2021, and willingness to donate dropped from 45.8% to 37.2% during the same period.

According to the report, private donations have practically stagnated in terms of scale. The proportion of private donations relative to GDP decreased by 0.04 percentage points from 0.79% in 2011 to 0.75% in 2021. Although the total amount of private donations increased by 41.0%, from 11.0 trillion won to 15.6 trillion won during the same period, nominal GDP grew by 49.2%, from 1,389 trillion won to 2,072 trillion won, outpacing the growth rate of private donations.

The stagnation in the proportion of private donations relative to GDP appears to be influenced by a combination of factors, including the 2014 change in the personal donation tax deduction method (from income deduction to tax credit) and the COVID-19 pandemic. In fact, donation amounts had been steadily increasing until 2013 but decreased from 7.7 trillion won in 2013 to 7.1 trillion won in 2014 due to the change in deduction method, and total donations shrank from 14.5 trillion won in 2019 to 14.3 trillion won in 2020 due to the pandemic.

The report mentioned, "Since the 2000s, donation tax support has been reduced, and regulations on public interest corporations have been tightened, resulting in a passive donation policy," and identified three measures to revitalize private donations: ▲ expanding donation tax support, ▲ improving regulations on public interest corporations, and ▲ spreading donation culture in daily life.

Source: Korea Chamber of Commerce and Industry

First, the report pointed out that "the scale of personal donations declined after the 2014 change in deduction method (from income deduction to tax credit)" and proposed that "bold tax support is needed, such as reverting to the income deduction method like major countries, adopting a choice system between income deduction and tax credit, or increasing the tax credit rate from the current 15% to over 30%."

It also argued that the non-taxable limit for corporate donations should be raised. "Since the reduction of the statutory donation expense limit for corporations from 100% to 50% in 2006, the number of companies that do not receive tax benefits for the excess amount has been steadily increasing," and "there is a paradoxical situation where companies that donate more each year find it harder to receive tax benefits, raising concerns about a reduction in corporate donation amounts." According to National Tax Service statistics, corporate donation amounts have stagnated since 2018.

Regarding regulations on public interest corporations, the report stated, "Unlike major countries where public interest corporations are being revitalized, South Korea excessively regulates them out of concern for maintaining or expanding the dominance of large corporations," and emphasized, "Corporate public interest corporations serve as a channel for companies to fulfill their social responsibilities, so it is necessary to actively ease regulations to encourage public interest activities by large corporations with strong donation capacity and resources."

Lastly, the report stressed the need to spread a donation culture in daily life through early education alongside policy improvements to revitalize private donations. "In advanced countries, various programs are operated to naturally practice donations from childhood at home and school," and suggested, "South Korea should also educate children from an early age to internalize the perception that sharing is natural in daily life, rather than teaching the obligation to donate through moral education."

Lee Su-won, team leader of the Economic Policy Office at the Korea Chamber of Commerce and Industry, said, "The role of private donations as a social safety net complementing the government's welfare policy limitations has become more important after experiencing the pandemic," and added, "To revitalize private donations, a proactive policy shift is needed to move away from regulation-only policies by easing regulations and significantly increasing incentives."

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