Taxation polarized among salaried men

By Kim Da-ye

The top 18 percent of Korea’s salaried workers paid more than 92 percent of the total income tax collected, research showed Sunday.

The 2009 data presented by Seong Myung-je, senior researcher at Korea Institute of Public Finance, showed that about 60 percent of 14.29 million salaried workers paid income tax while the rest received exemptions.

The top 10-percent of wage earners took home 83.51 trillion won in salaries, which represents 26 percent of the total amount of the earnings of all tax-paying salaried workers.

The income tax paid by the top 10 percent, however, accounted for 68 percent of the total collected from all workers.

Those belonging to the second tier made 50.07 trillion won and contributed nearly 17 percent to the total income tax collected while the third highest-earning group took home 39.77 trillion won and contributed 7.57 percent.

The top 30 percent of the tax-paying salaried workers paid 92.30 percent of the total income tax. When those exempted from income tax are included, the top 18 percent of the workers contributed 92.3 percent.

In contrast, income tax paid by the bottom half of salaried workers accounted for just 1.57 percent of the total.

Seong said that the progressive scale in taxation got steeper, causing the high-income group to pay a greater amount of tax, but the re-distributive impact of income tax shrunk.

Korea’s re-distributive impact of income tax was relatively small at 3.2 percent, compared to 6.5 percent in the U.S., 8.1 percent in the U.K. and 10.9 percent in Canada, Seong said.

He argued the high-income group end up paying more because not many wage earners liable for income taxes actually paid them.

His data shows that the portion of taxpayers against those under the obligation to pay tax was slightly below 60 percent in 2009 although the figure grew from 51.3 percent in 2005 and 57.9 percent in 2007.

In 2009, 14.2 million earners were liable to pay income tax, but just 8.54 million did. The total collected income tax was worth 12.9 trillion won ― 1.5 million won for each taxpayer on average.

Furthermore, the portion of income tax against the entire taxation is small in Korea and stood at 15 percent, compared to 37.9 percent in the U.S., 29.9 percent in the U.K, and 37.3 percent in Canada, he said, quoting revenue statistics data from the OECD.

“The continuous and substantial income tax exemption caused a decrease in the proportion,” Seong said.

The researcher added that the income inequality would widen as the Korean population ages faster and the disparity widens among the elderly.

“The future policy in dealing with income inequality should focus on the elderly. It will also be necessary to encourage them to actively participate in the labor market,” he said.

His presentation was made during an experts’ meeting organized by the National Assembly Budget Office.