By Jun Ji-hye
Koreans will likely face an increased tax burden from next year regardless of who is elected in the December election, as all three major presidential candidates have called for investing more in a social safety net, according to a recent report Sunday.
The Korea Institute of Public Finance (KIPF) found that the ruling Saenuri Party’s welfare pledges will require the government to raise an additional 75.3 trillion won ($68 billion), compared with 164.7 trillion won to pay for the Democratic United Party’s (DUP) pledges.
Reps. Park Geun-hye of the Saenuri Party and Moon Jae-in of the DUP have promised to spend more on free school meals, free childcare, compulsory education and halving tuition costs.
If these pledges are to be implemented as planned, the think tank warned that the government debt would jump to as high as 114.8 percent of gross domestic product (GDP) in 2050.
This is a similar level to such crisis-hit European countries as Spain and Portugal.
Koreans’ tax burden against the GDP is 20 percent, compared to Organization for Economic Cooperation and Development (OECD) countries’ average of 26 percent.
A tax increase has become an election buzzword.
In a radio program Thursday, Lee Jung-woo, an economist in charge of the economic justice committee of the Moon camp, said that “A universal tax boost is necessary to expand welfare. All candidates need to be frank about this and say that a tax increase is inevitable as they call for spending more for social policies.”
The universal tax increase is a shift of the DUP’s social policy because it focused on a net wealth tax on the top 1 percent.
The vision is similar to that of independent Ahn Cheol-soo. He said in his book “Ahn Cheol-soo’s Thoughts” that “Not only high income earners, but also the middle- and low-income earners need to shoulder more of a tax burden in accordance with their income to expand welfare.”
Although Park hasn’t specifically expressed her stance on a tax increase, the concept of a net wealth tax has come up within the party ranks after Kim Moo-sung, the newly-appointed general manager of her election camp, suggested it Thursday and later downplayed the remarks Friday, saying that he was expressing a personal opinion.
Kim claimed that the financial turmoil in some European countries is the consequence of populist welfare policies.
Experts shared the view on the need to increase taxes.
Cho Won-dong, president of the KIPF, said “Raising income and social security taxes is unavoidable for the government’s financial health.”
Wi Pyung-ryang, an analyst for the Economic Reform Research Institute, concurred. “The government cannot meet soaring demand for welfare programs with job creation and economic growth,” he said.
Experts cautioned that a likely increase in tax evasion will be the consequence of such tax hikes.