Amid growing tax resistance in the wake of the “comprehensive real estate tax bomb,” South Korea's tax competitiveness was found to have dropped most drastically among the member countries of the Organization for Economic Cooperation and Development (OECD). According to a report from the Korea Economic Research Institute (KERI) Thursday, the nation's tax competitiveness fell nine notches to 26th in 2021 from 17th in 2017. KERI, a research arm of the Federation of Korean Industries (FKI), released the results based on a survey conducted by the U.S. Tax Foundation.
The foundation's survey of 37 OECD member nations showed that Korea marked the sharpest drop in tax competitiveness. By comparison, the United States rose seven notches from 28th to 21st place during the corresponding period while France and the United Kingdom also saw their rankings go up by two notches and one notch, respectively.
Specifically, Korea saw its ranking drop in three areas ― corporate, income and property taxes. It registered a rise only in consumer tax. The U.S. foundation has been announcing the tax competitiveness indices since 2014. The seemingly disappointing results for Korea seem to be due to the excessive taxation here. In the field of corporate tax, Korea saw its ranking drop by seven notches while the U.S. saw its ranking rise by 15 notches and France went up two notches.
The U.S. lowered the maximum rate of corporate tax from 35 percent to 21 percent in 2018. It also reduced the categories of corporate taxation from eight to one, simplifying the tax system and mitigating the payment burden to a great extent. In contrast, Korea raised the maximum corporate tax rate from 22 percent to 25 percent in 2018 while expanding the categories of corporate taxation from three to four, resulting in a weakening of the country's competiveness in that area.
In the income tax sector, Korea's competiveness dropped seven notches. Korea hiked the maximum income tax rate from 40 percent to 42 percent in 2018 and again raised it to 45 percent in 2021. Korea saw a one-notch drop in the area of property tax, since it continued to raise tax rates for real estate holdings and transactions. It also expanded the range of the comprehensive real estate tax.
As a matter of fact, people and businesses have been suffering from ever-increasing tax burdens. The Moon Jae-in administration cannot deflect criticism for having aggravated the tax problems. An increasing number of taxpayers are seeking collective tax resistance against the “punitive” comprehensive real estate tax levied on them.
The number of people subject to the comprehensive property tax rose 42 percent from last year with the total amount of payment increasing 3.2 times. Excessive taxation may pose unbearable burdens on retired people, in particular, and shake the real estate market as tenants will eventually bear the brunt. Excessive taxation should be eased without fail as it may nibble away at economic growth and undermine market vitality. This is the only way to enhance tax competitiveness and help boost the economy.