"Only Office Workers Were 'Completely' Taxed"... More Earned Income Tax Collected Than Last Year

Cumulative Labor Income Tax in July Up 100 Billion Won Year-on-Year
Labor Income Tax Share of National Tax Increases by 4.6% in 5 Years
Corporate Tax and Capital Gains Tax Account for 70% of Total Tax Revenue Shortfall

With corporate tax and capital gains tax sharply declining, this year is expected to record an unprecedented 'tax revenue shortfall' of 59 trillion won, falling short of projections. However, income tax from salaried workers has been collected more than last year.

Only Salaried Workers' Wallets Are Emptied... Income Tax 'Increasing Alone'

[Image source=Yonhap News]

According to the 'Monthly Tax Revenue Status by Tax Type' data received from the National Tax Service by Go Yong-jin, a member of the National Assembly's Planning and Finance Committee from the Democratic Party of Korea, national tax revenue until July this year amounted to 217.6 trillion won, a decrease of 43.4 trillion won (16.6%) compared to 261 trillion won a year ago.

While all tax categories have shrunk, only income tax from salaried workers has increased. Income tax levied on workers' salaries reached 37 trillion won, about 100 billion won more than last year's 36.9 trillion won. In July alone, 5.8 trillion won was collected, approximately 300 billion won more than the same month last year.

If this trend continues, income tax from salaried workers is expected to increase by more than 1 trillion won compared to last year by the end of this year.

Due to economic downturn and tax reduction policies, corporate tax, capital gains tax, and comprehensive income tax have all decreased, but only the tax paid by salaried workers, the 'glass wallet,' has increased.

Income tax from salaried workers surpassed 30 trillion won in 2016 and exceeded 60 trillion won last year, just six years later. According to government statistics, last year's income tax from salaried workers was 57.4418 trillion won, but the National Tax Service's collected amount was 60.3704 trillion won.

The difference arises because the government deducts the amount of earned income and child tax credits paid to workers from the income tax collected by the National Tax Service when compiling statistics. Last year, 5 trillion won was paid in earned income and child tax credits, of which 3 trillion won came from income tax and 2 trillion won from comprehensive income tax.

Last year's income tax from salaried workers increased by 25.3 trillion won (72%) compared to 35.1 trillion won in 2017. This increase rate is much higher than the overall national tax growth rate of 49.2% during the same period. The increase in income tax from salaried workers is larger than that of other tax categories. Additionally, the share of income tax from salaried workers in total national tax rose from 13.2% in 2017 to 15.3% in 2022.

The problem is that the 'solo increase' of income tax from salaried workers is expected to intensify this year and next year.

With a sharp decline in tax revenue this year, only income tax from salaried workers has increased, so its share in total national tax is expected to grow further. Next year, the government's tax reduction policies on corporate tax and others will be fully reflected in tax revenue.

The government has budgeted next year's national tax revenue at 367.4 trillion won, a decrease of 33.1 trillion won (6.3%) from this year's budget. However, income tax from salaried workers is planned to increase by 1.5 trillion won (2.4%) to 62.1 trillion won compared to this year's budget.

Including 3.5 trillion won in earned income and child tax credits, the government expects actual income tax from salaried workers to exceed 65 trillion won next year. Accordingly, the share of income tax from salaried workers in total national tax will rise to 17.8%.

On the other hand, due to worsening corporate performance this year, corporate tax is expected to decrease to 77.7 trillion won next year. The share of corporate tax in total national tax will decline from 22.5% in 2017 to 21.1% next year.

Unprecedented 'Tax Revenue Shortfall' Due to Worsening Corporate Performance and Decline in Private Consumption

The tax category with the largest decrease among national taxes is corporate tax, which fell by 17.1 trillion won (26.1%) from 65.6 trillion won last year.

Corporate tax is divided into declared tax based on business performance and withholding tax on interest and dividend income received by corporations.

Among these, corporate tax declared based on business performance decreased by 36.3% (19.1 trillion won) compared to 55.4 trillion won last year due to worsening corporate performance.

The second largest decrease among tax categories is capital gains tax, a type of income tax.

Capital gains tax decreased by 11.1 trillion won compared to 20.7 trillion won a year ago, a 53.6% reduction compared to the same period last year.

Corporate tax and capital gains tax together account for 30.2 trillion won, or 70% of the total tax revenue shortfall.

The cumulative decrease in income tax until July (12.7 trillion won) is 87% due to the decline in capital gains tax. Comprehensive income tax, imposed on self-employed and individual business owners, also decreased by 16.2% (2.4 trillion won) to 12.4 trillion won compared to 14.8 trillion won a year ago.

Value-added tax (VAT) decreased by 6.1 trillion won (9.7%) to 56.7 trillion won compared to 62.9 trillion won a year ago. VAT consists of domestic and import components. Due to a decline in private consumption, the domestic component decreased by 3.2 trillion won (10.8%) compared to 29.5 trillion won a year ago, and the import component also decreased by 2.8 trillion won (8.4%) compared to 33.3 trillion won a year ago due to reduced customs imports.

Taxes linked to the asset market, such as gift tax (down 0.9 trillion won), securities transaction tax (down 0.7 trillion won), and comprehensive real estate holding tax (down 0.3 trillion won), also shrank by more than 10%. Due to the decline in publicly announced property prices and the tax law amendments passed last year, the comprehensive real estate holding tax in the second half of this year is expected to be collected significantly less than the budgeted 5.7 trillion won.

The comprehensive real estate holding tax in the first half of the year was based on last year's installment payments, so the tax to be billed this year has not yet been reflected.

Assemblyman Go stated, "Due to economic downturn and tax reduction policies, tax revenues such as corporate tax, capital gains tax, and VAT have all shrunk, but only the tax paid by salaried workers, the glass wallet, has increased," emphasizing, "The ones who really need brakes on the pace of taxation are not large corporations but salaried workers."

He continued, "The government said that cutting taxes for companies would increase investment and thus tax revenue, but in reality, it only resulted in a massive tax revenue shortfall," he criticized.

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