Salaried workers are often called the “people carrying glass wallets” here because tax officials can look into their income statements transparently. The ongoing National Assembly inspection of government offices has reaffirmed this public perception.
According to data submitted by the National Tax Service to Rep. Park Myung-jae of the main opposition Liberty Korea Party, Korean workers’average wage rose less than 30 percent from 2008 to 2015 while their income tax payment jumped 60 percent. That is, taxes grew twice as fast as salaries during the seven-year period.
An average salaried worker earned 32.6 million won ($28,913) in 2015, up 28.9 percent from 2008. The withholding tax, on the other hand, soared 60 percent to 1.6 million won from 1 million won over the same period.
The gap between the income growth rate and income tax increase rate widened to 31.1 percentage points for wage earners. The comparable difference for self-employed people remained at 6.4 percentage points, however.
On average, self-employed people paid 2.7 million won more in income tax than salaried people in 2015. Still, wage earners have greater discontent with the taxation system. Why? While taxmen can catch up to 98 percent of salaried people’s earned income, the corresponding ratio for self-employed people and high-income professionals, such as lawyers and accountants, stands at 72.8 percent.
What makes wage earners angrier still is the too steep a rise in their income tax rate. Last year, salaried workers paid an aggregated 31 trillion won in earned income tax, surpassing the 30 trillion won threshold for the first time with an increase of 14.6 percent from 2015. Over the past five years, the average share of income tax grew to 3.1 percent of total tax payment in the 35 OECD member nations. The corresponding share for Korea jumped 18.7 percent.
Worse yet, out of the total 16.69 million wage earners in 2014, 8.02 million did not pay a cent in taxes, but the government’s revenue increased that year, meaning the tax burden on the other 8.67 million became much heavier. In Korea, the top 10 percent on the income ladder shouldered 75.9 percent of tax payments, and those who earn 55 million won or more bore a disproportionate burden, while the bulk of unearned income of wealthy people slips through loopholes in the nation’s loose taxation net.
Until and unless the principle of “broad taxation source, low tax rate” is kept, there can be no “taxation justice” pledged by successive governments.
The Moon Jae-in administration ought to reform the tax system to create a social consensus that all Koreans, wage earners and self-employed, pay taxes in exact proportion to their income. Or, it will run into stiff resistance from salaried taxpayers before long.