Yejungcheo "Government Tax Law Revision, High-Income Earners' Burden Reduced by 20 Trillion Won Over 5 Years"

Analysis of the 2024 Tax Law Amendments by Yejeongcheo
Total Tax Burden Effect is 19.506 Trillion KRW
Inheritance and Gift Tax Revisions Significantly Reduce Tax Burden for High-Income, High-Net-Worth Individuals

According to the tax law amendment bill submitted by the government to the National Assembly, tax revenue is expected to decrease by 19.506 trillion won over the next five years, with a significant portion of the tax cuts analyzed to be targeted at 'high-income, high-asset individuals.' This contrasts with the government's analysis that the tax cut effects of the tax law amendment are aimed at low- and middle-income groups.

According to the National Assembly Budget Office's report "Analysis of the 2024 Tax Law Amendment Bill" on the 31st, the government's tax law amendment bill is analyzed to reduce tax burdens for low- and middle-income groups (total annual salary of 84 million won or less) by 1.7456 trillion won over the next five years. In contrast, high-income earners will see a reduction in tax burdens amounting to 20.0588 trillion won.

This analysis is based on the cumulative method, which converts the tax revenue effects annually based on this year, while the net method, which converts only the previous year's tax revenue effects, analyzes tax cuts for low- and middle-income groups at 326.6 billion won and for high-income earners at 4.4082 trillion won over five years. This differs significantly from the government's announced tax revenue effects. The government had estimated that tax cuts for low- and middle-income groups would reduce taxes by 628.2 billion won over the next five years, while high-income groups would see a reduction of 166.4 billion won.

This discrepancy arose because the government classified adjustments such as 'inheritance and gift tax (Sangjeungse) rate and taxable base bracket adjustments' and 'expansion of inheritance tax child deduction amounts' as 'other items,' for which it is difficult to attribute tax revenue effects. In contrast, the Budget Office judged that the government's Sangjeungse amendments would benefit high-income earners and high-asset individuals, thus counting it as a reduction in their tax burdens. A Budget Office official stated, "According to the government bill, the amendments to Sangjeungse are expected to significantly reduce the tax burdens of high-income and high-asset individuals."

By tax category, inheritance and gift taxes (20.1862 trillion won), income tax (1.1296 trillion won), and corporate tax (656.2 billion won) are expected to see decreases in tax revenue. Conversely, value-added tax (1.5742 trillion won) is projected to increase tax revenue.

For corporations, the tax law amendment is analyzed to reduce tax burdens for small and medium-sized enterprises (SMEs), while increasing tax burdens for large corporations. The government estimated that taxes for SMEs and large corporations would decrease by 239.2 billion won and 91.7 billion won respectively over the next five years. However, the Budget Office expects that while SMEs will see a tax reduction of 235.6 billion won, large corporations will experience an increase in tax burdens of 114.9 billion won.

Concerns have also been raised about the reduction in tax revenue due to the tax law amendment amid a shrinking revenue base, including two consecutive years of tax revenue shortfalls. The Budget Office pointed out, "There are concerns about the deterioration of fiscal soundness due to continuous tax system reforms that reduce tax revenue."

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