Government Reviews Income Tax Reform for the First Time in 15 Years... Will Employee Tax Burden Decrease?

by Kwon Haeyoung

Published 10 Jul.2022 19:36(KST)

[Asia Economy Sejong=Reporter Kwon Haeyoung] The government is considering reforming the income tax system for the first time in 15 years.

According to the government on the 10th, the Ministry of Economy and Finance is reviewing measures to adjust the current income tax brackets and rates ahead of the announcement of the tax law amendment bill at the end of this month.

The current Income Tax Act applies income tax rates ranging from 6% to 45% across eight tax base brackets. The rates are 6% for income up to 12 million KRW, 15% up to 46 million KRW, 24% up to 88 million KRW, 35% up to 150 million KRW, 38% up to 300 million KRW, 40% up to 500 million KRW, 42% up to 1 billion KRW, and 45% for income exceeding 1 billion KRW.

This essentially maintains the basic framework of the four-tier tax rate system (up to 12 million KRW, up to 46 million KRW, up to 88 million KRW, and over 88 million KRW) applied since 2008 for 15 years. Previously, the government slightly lowered the tax rates for three of the four tiers, but the changes were minimal, and it only increased taxes on high-income earners by adding tax brackets with higher rates at 150 million KRW, 300 million KRW, 500 million KRW, and 1 billion KRW.

As prices have risen but the income tax brackets and rates have remained unchanged, there have been criticisms that this has effectively amounted to a tax increase.

Accordingly, regarding the tax law amendment bill to be released at the end of this month, measures such as raising the tax brackets while keeping or lowering the minimum taxable income threshold are being discussed. The government is currently negative about further expanding the tax-exempt group, which stands at around 37%.

In this regard, a Ministry of Economy and Finance official explained, "We are reviewing various measures to support low-income and middle-class households, but we are not currently considering a comprehensive reform of the overall income tax system."