Tax agency doulbles deductions for families with multiple children

By Kim Jae-won

The tax agency said Wednesday it will double additional income tax deductions for families with multiple children from this year to encourage more women to give birth in the face of an aging society.

The National Tax Service (NTS) announced that it will provide 1 million won ($887) and 3 million won of additional deductions for families with two and three children, respectively, from the 2011 income tax filing, up from 500,000 won and 1.5 million won. Families which have four and five children will benefit from 5 million and 7 million won of deductions, respectively, the NTS added.

“The amount of multiple children additional deductions has doubled from previous years aiming to encourage births and to support families with several children,” the NTS said in a statement.

But taxpayers say that the real benefits are not that much. Lim Soo-hyang, a 31-year-old housewife who has two children in Goyang, Gyeonggi Province, will receive an additional 500,000 won in income tax deductions from the previous year. Applying 17 percent of the income tax rate for the deduction, the real benefit will be just 85,000 won.

This is part of the government’s efforts to boost the birthrate. According to Statistics Korea, the population will grow to 52.16 million by 2030 but decline to 43.96 million in 2060. The statistics agency said the number of senior citizens aged 65 or over will top that of young people in 2017.

The tax authorities will also increase deduction limitations on donations of up to 30 percent of taxpayers’ income to spread a sharing culture here. Beneficiaries of the donation deductions will be enlarged from spouses of donors to siblings.

The NTS will keep its unique deductions for credit and debit card payments this year at 3 million won. The government considered removing the benefits earlier this year, but gave up on the plan after protests from the public.

The Korean government has provided deductions for credit and debit card payments from the late 1990s to find hidden tax revenue sources.

The tax authorities will also simplify the required documents for deductions for tenants who pay monthly rent. Tenants no longer need to submit Certification for Paying Monthly Rent Fees which the landlord should sign. Instead, they are required to submit the housing contract, residence registration certificate and banking history of paying rent.