OECD 'Taxing Wages 2025' Report

A recent survey found that the tax burden on single workers in South Korea is more than 12 percentage points higher than that of workers with two children. Although tax incentives for childbirth and childrearing have increased significantly, there has been no comprehensive reform of the earned income tax system. As a result, single households are effectively paying a "single tax."

According to the "Taxing Wages 2025" report recently published by the Organisation for Economic Co-operation and Development (OECD) on May 8, the "net average tax rate" for single households earning the average income in South Korea last year was 16.3%. This means that if a single worker earns 1 million won, they actually receive 837,000 won after taxes.

The net average tax rate is an indicator that measures how much of a worker's wage is their actual income. It takes into account not only the taxes and social security contributions paid by workers, but also the cash benefits they receive. A higher number indicates that workers are paying heavier taxes or receiving fewer benefits. Unlike the "tax wedge" statistic, which includes employer taxes, or the "effective tax rate" indicator, which does not reflect social benefits, this metric accurately measures a worker's real income.

For a single-income household raising two children, the net average tax rate was 3.9%. This means that, even with the same income, single households bear a tax burden 12.4 percentage points higher than households with two children. The OECD explained, "Considering child-related allowances and tax provisions, this is the 34th lowest level among OECD countries," and added, "In Korea, the average married worker with two children received 96.1% of their total wage."

The gap in tax rates between single households and those raising children has been widening. Over the past 10 years, the net average tax rate for single households rose by 2.3 percentage points, while it fell by 7.6 percentage points for households with two children. In 2015, the tax rate for single households was 14%, compared to 11.5% for households with two children, a difference of only 2.5 percentage points. In 2018, the gap narrowed to 2.2 percentage points. However, since 2019, the tax rate for single households has continued to rise, while the rate for households with two children has started to drop sharply.

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The increase in the tax burden for single households is also related to the earned income tax system, which has remained unchanged for more than a decade. Since there are no separate tax benefits, wage increases naturally push workers into higher tax brackets. For example, the proportion of workers earning more than 80 million won in total annual salary nearly doubled from 6.2% to 12.1% over the past 10 years. Although nominal wages have increased every year, the "tax base of 88 million won" standard has not changed since 2008.

On the other hand, households with two children appear to have seen their tax burden significantly reduced thanks to the government's tax incentives for childbirth and childrearing, as well as various cash benefits. Last year, the government raised the child tax credit to 250,000 won for the first child, 300,000 won for the second child, and 400,000 won for the third child. Compared to when it was introduced in 2014, this is an increase of about 100,000 to 200,000 won. Other benefits include deductions for childbirth and adoption, postpartum care center tax credits, child allowances, parent allowances, and childrearing subsidies. Starting this year, childbirth support payments received from employers are also fully tax-exempt.

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Parent Allowance Guide

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A staff member is taking care of a newborn in the neonatal room of a postpartum care center in Seoul. Photo by Yonhap News

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As a result, there are growing voices saying that single households are effectively paying a "single tax." Lee Younghan, a professor of taxation at the University of Seoul, said, "When you get married, you can allocate income to the spouse with the lower marginal tax rate and receive various deductions, so in reality, singles end up bearing the single tax burden," adding, "Since the tax burden on singles naturally increases, I don't think there is a need for additional taxation."