Koreans suffer growing tax burden

By Jhoo Dong-chan

Korean taxpayers are shouldering a growing burden as the Moon Jae-in administration is collecting more taxes and quasi-taxes to support its welfare policies.

According to data released by the National Assembly Budget Office, Monday, the nation's tax-to-GDP ratio came to 26.8 percent last year, up 1.4 percentage points from the previous year.

The tax-to-GDP ratio is determined by dividing the country's entire tax revenue, including social security and healthcare premiums, by its GDP.

The figure has risen for five years in a row since 2014, but this was the biggest year-on-year jump in 10 years.

The tax-to-GDP ratio dropped slightly to 22.7 percent in 2009 from the previous year's 23.6 percent thanks to the then Lee Myung-bak administration's tax cutting policies.

The figure reached 22.4 percent the following year, and then rebounded to 23.2 percent in 2011 and 23.7 percent in 2012.

The 2013 tax-to-GDP ratio fell a bit to 23.1 percent when Park Geun-hye came to office, and then rose again to 23.4 percent in 2014, 23.7 percent in 2015 and 24.7 percent in 2016.

It has displayed rapid growth under the current administration as the figure jumped to 25.4 percent in 2017 and 26.8 percent last year.

The data also demonstrated that last year's jump in Korea's tax-to-GDP ratio was reflected in the country's mounting tax revenue.

The Ministry of Economy and Finance said total earnings from taxes stood at 377.9 trillion won ($310.2 billion) last year, a record high.

State taxes alone marked 293.6 trillion won while local taxes reached 84.3 trillion won last year, up 28.2 trillion and 3.9 trillion won, respectively, from the previous year.

Thanks to the boom in the semiconductor industry, 19.9 percent more corporate taxes were collected last year. Earned and transfer income taxes jumped 11.7 percent and 19.1 percent, respectively, year-on-year.

Experts displayed their skeptical outlook on such an uptrend.

“The Moon administration is applying the Scandinavian model, which is based on a very high income tax structure,” Korea University professor Kim Tae-il said.

“I don't think it's possible to adopt the Scandinavian model in Korea. We need to create a modified form under the current economic structure.”

The data showed, however, that Korea's tax-to-GDP ratio is still lower than the average of other OECD member states.