Anna Jiwon Park has been covering the politics at The Korea Times since the summer of 2024, when she joined the press pool for the Office of the President in Korea. Prior to that, she spent about five years reporting extensively on financial markets, regulatory authorities and the financial industry. She joined The Korea Times in 2019 after spending eight years as a broadcast journalist at Arirang TV, Korea’s leading global broadcaster, covering politics, defense and culture.
Gov't considers giving tax benefits to Booyoung, employees for baby bonuses
Booyoung Group Chairman Lee Joong-keun, center, poses with an employee's family after giving them 200 million won ($150,000) in cash during a New Year ceremony at the company headquarters in Seoul on Feb. 5. Yonhap
By Anna J. Park
After Booyoung Group's recent announcement to pay a combined 7 billion won ($5.25 million) in cash for 70 babies born to its employees after 2021, the government is considering offering tax benefits both to the company and the employees over the childbirth bonus.
The finance ministry said Thursday that the government is looking into various scenarios in which the company's and the employees' tax burdens can be significantly reduced.
Since the group said earlier this month that it will offer 100 million won per baby born to its employees, some have pointed out that collecting tax on the bonus payment would slash the intended effect of providing financial assistance to new parents.
"The government will make a decision soon over whether Booyoung Group's childbirth encouragement money should be regarded as employment income or as a gift," an official from the finance ministry said.
Whether the bonus money should be interpreted as an employee's income or a gift by the corporation is an important issue when it comes to applying relevant tax regulations and thereby deciding the final tax amount over the money.
If interpreted as a "gift" per the Korean tax code, employees who receive the childbirth bonus would only have to pay 10 percent of the bonus money as tax, which would amount to 10 million won. However, in this case, Booyoung Group doesn't receive a tax cut that it would receive if the bonuses were reported as wages for employees, not gifts.
On the other hand, if the bonus money is to be reported as an employee's income, Booyoung can receive a tax cut for the money it spends. But this means the employees who received the bonus would have to pay much higher income taxes depending on their income brackets, which could be as expensive as 38 million won, or 38 percent of the bonus.
The government's considerations for tax code revisions for childbirth bonuses come against this backdrop.
President Yoon Suk Yeol ordered the government on Tuesday to devise various support measures, including tax benefits, to encourage companies to give their employees bonuses for having children.
Yoon further said it is encouraging that companies are putting in efforts to overcome Korea's low fertility issue, urging the government to support such actions from the private sector.