"'Tax Cuts for the Wealthy and Lack of Philosophy' Opposition to Tax Law Amendment Bill" Democratic Party and Justice Party to Propose Their Own Amendments

Democratic Party "No Effort Seen for Tax System Modernization and Fair Taxation"
Justice Party "Focus on Enhancing Tax Transparency and Equity"
Likely to Miss Legal Deadline Again This Year... Tax Law Amendment Bill Faces Processing Difficulties

Amid concerns over an unprecedented 'tax revenue shortfall,' the recently announced tax reform bill by the government has not escaped criticism for 'tax cuts favoring the wealthy' and 'inheritance of wealth.' Although major tax reform issues such as corporate tax rates and comprehensive real estate tax were omitted, the tax cut stance was still maintained.

The Democratic Party and the Justice Party have criticized this and announced plans to propose amendments to the tax reform bill. Since the government's tax reform bill must be finally passed by the National Assembly to become law, there is a possibility that the amendments from the two parties will be reflected. With next year's election approaching, if the ruling and opposition parties clash over the tax reform bill to appeal to voters, difficulties are expected more than ever.

Last month, the government announced the '2023 Tax Reform Bill.' The most notable item is the expansion of the gift tax exemption limit for marriage funds from the current 50 million won to up to 300 million won (150 million won each from both parents). To strengthen 'K-content competitiveness,' the tax credit rate for video content production costs will also be increased up to 30%, and the biopharmaceutical industry will be designated as a national strategic technology, with tax reductions of 25-35% for facility investments and 30-50% for research and development (R&D) expenditures. The income threshold for the Child Tax Credit (CTC), which supports child-rearing in low-income families, will also be raised from the current 40 million won to 70 million won, expanding the beneficiary base.

On the morning of the 9th, at the Seoul Government Complex, Deputy Prime Minister for Economy Choo Kyung-ho is presiding over the Emergency Economic Ministers' Meeting and Export Investment Measures Meeting. Photo by Jo Yong-jun jun21@

The Democratic Party strongly criticized the tax reform bill as a 'super-rich tax cut.' The party launched a Special Committee on Tax and Fiscal Reform and pressured the ruling party by stating they would directly propose amendments to the tax reform bill and budget. On the 19th, Lee Yong-seop, Chair of the Democratic Party's Special Committee on Tax and Fiscal Reform, said in a phone interview, "The government's tax reform bill for next year is difficult to see as a tax system reform; it is merely a simple supplement with no philosophy or distinctiveness."

Lee pointed out, "Despite the forecast that national tax revenue will decrease by more than 70 trillion won compared to the budget this year, there is no effort to expand the revenue base, and the tax law seems to deepen social polarization rather than alleviate it." He added, "Efforts to modernize the tax system or ensure fair taxation are also absent, as the government's plan to shift inheritance tax to an acquisition-based tax was scrapped."

He further stated, "The government aims for a small state model with low tax burden and low welfare, which is a backward model and a wrong path. No advanced country adopts a low tax, low welfare model." He emphasized, "A contraction-oriented balanced budget that reduces both taxes and fiscal spending to maintain fiscal soundness, as the government proposes, lowers growth potential and exacerbates social inequality and polarization. We will prepare next year's tax reform bill based on 'appropriate burden and appropriate welfare.'"

The Justice Party has also begun discussions on amendments in response to the government's tax reform bill. A Justice Party official said, "We are preparing based on our pledges from the last general and presidential elections, focusing on withdrawing tax cuts for the wealthy, expanding asset taxation, and strengthening tax transparency and fairness to address the climate crisis and inequality."

Park Kwang-on, floor leader of the Democratic Party of Korea, is conversing with Chairman Lee Yong-seop at the 1st meeting of the Special Committee on Tax and Fiscal Reform held at the National Assembly on the 14th. Photo by Kim Hyun-min kimhyun81@

According to Jang Hye-young, a Justice Party member of the National Assembly's Planning and Finance Committee, the tax cuts over five years amount to 82 trillion won from reductions in corporate tax, income tax, comprehensive real estate tax, and the Restriction of Special Taxation Act last year; 11 trillion won over four years from semiconductor conglomerates' investment tax credits this year; extensions of fuel tax reductions and adjustments to the fair market value ratio by government decree; and the current tax reform bill. The total tax cut scale during President Yoon Suk-yeol's five-year term is expected to reach 100 trillion won.

Jang criticized the tax reform plan that expands the newlywed gift tax exemption from the current 50 million won to up to 300 million won. She analyzed that a 30-something who married last year and received marriage expenses from their parents and paid gift tax would be in at least the top 14% income bracket. Jang said, "This year's tax reform bill can be summarized as a 'tax cut package for the general election.' It is evident that they are trying to take credit by cutting taxes in over 100 detailed areas. The focus remains on supporting the wealthy and corporations and facilitating the inheritance of wealth."

The tax reform bill has rarely passed within the legal deadline. Last year, discussions on the tax reform bill stalled and it barely passed as a budget-related bill. At that time, the ruling and opposition parties engaged in a tug-of-war over the budget and tax reform bill, which was handed over to a '2+2 consultative body' composed of the policy chiefs of both parties and budget committee secretaries. There were criticisms that the bill review process was repeatedly conducted in the dark.

[Image source=Yonhap News]

On December 22 last year, the ruling and opposition parties agreed on the budget and related bills at once, and these bills were collectively processed in the plenary session. Since the process was conducted through behind-the-scenes negotiations, there was controversy that the bills became bargaining chips between the parties. This was also proven by the vote on the amendment to the Corporate Tax Act to reduce the corporate tax rate by 1 percentage point, which saw 37 votes against and 34 abstentions.

This year, since the Democratic Party and the Justice Party have declared they will propose new tax reform bills, it seems unlikely that the government's bill will pass as is. Although the Democratic Party sharply shifted its opposition stance last year, with next year's general election at stake, the party is likely to put its all into the tax reform bill. Especially amid concerns over an unprecedented 'tax revenue shortfall' this year, the government's tax reform plan maintains a tax cut stance and has not escaped the public perception of being a 'tax cut for the wealthy.' According to the Ministry of Economy and Finance's 'Monthly Fiscal Trends August Issue,' total revenue in the first half of the year was 296.2 trillion won, down 38.1 trillion won from the same period last year. National tax revenue was 39.7 trillion won less than the previous year, with corporate tax down by 16.8 trillion won and income tax down by 11.6 trillion won due to decreased real estate transactions.

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