By Yoon Ja-young
People owning multiple homes or high-priced real estate will face an increase in taxes as part of a tax code revision unveiled by the Ministry of Strategy and Finance, Monday.
Also, those who avoid taxes by transferring income or wealth overseas will be subject to heavy penalties.
The government explained that fairness and justice will be the keywords for tax revision, which focuses on income distribution and sustainable growth.
"Despite relatively sound indices, people's perception of economic conditions isn't good due to problems in the job market and sluggish improvements in household income while external uncertainties loom for the nation," Strategy and Finance Minister Kim Dong-yeon said at a media briefing.
He said the tax revision is part of the administration's policies aiming for not only quantitative but also qualitative economic growth.
For fair taxation, the administration plans to increase the tax on rent income. Kim pointed out that loose taxation of rent income has led to inequity compared to income taxes on workers.
Currently rent income below 20 million won annually is exempt from taxes.
Comprehensive real estate taxes, which are levied on real estate assets, will also be strengthened. Currently, only 80 percent of the housing value is applied in calculating taxes but this will be raised to 90 percent. The tax rate will also be raised by between 0.25 percentage points to 1 percentage points.
People who hide real estate investment overseas will be levied penalties equal to 10 percent of the real estate's value. Currently, the penalty is 1 percent.
The tax revision puts priority on sustaining low-income households as they have been suffering from the sluggish job market and falling income.
The government plans to expand the earned income tax credit (EITC) scheme to effectively increase their income.
While 1.2 trillion won was offered to 1.66 million households in 2017, the program will be expanded to 3.8 trillion won benefiting 3.34 million households. Low-income households will also receive between 500,000 and 700,000 won per child as a tax credit, an increase of 200,000 won.
Businesses will receive tax breaks on investment into research and development into new technologies, but corporate and income tax cuts on foreign investments in free economic zones will be scrapped.
The government had promised to scrap the latter following the EU's inclusion of Korea in its non-cooperative tax jurisdictions last December. The EU claimed that the tax reduction discriminated against domestic companies.
The tax revision also backs up the administration's energy policy. Taxes on coal for power generation will be raised to 46 won per kilogram from 36 won, while taxes on LNG will be slashed to 23 won per kilogram from 91.4 won. This is part of efforts to decrease fine dust pollution.
The entry barrier will be lowered for duty free businesses, but those who are already operating duty free shops will be given opportunities to extend their licenses.
The government estimated that the revision will decrease the government's tax income by 2.5 trillion won over the next five years. The bill will be submitted to the National Assembly, Aug. 31.
People owning multiple homes or high-priced real estate will face an increase in taxes as part of a tax code revision unveiled by the Ministry of Strategy and Finance, Monday.
Also, those who avoid taxes by transferring income or wealth overseas will be subject to heavy penalties.
The government explained that fairness and justice will be the keywords for tax revision, which focuses on income distribution and sustainable growth.
"Despite relatively sound indices, people's perception of economic conditions isn't good due to problems in the job market and sluggish improvements in household income while external uncertainties loom for the nation," Strategy and Finance Minister Kim Dong-yeon said at a media briefing.
He said the tax revision is part of the administration's policies aiming for not only quantitative but also qualitative economic growth.
For fair taxation, the administration plans to increase the tax on rent income. Kim pointed out that loose taxation of rent income has led to inequity compared to income taxes on workers.
Currently rent income below 20 million won annually is exempt from taxes.
Comprehensive real estate taxes, which are levied on real estate assets, will also be strengthened. Currently, only 80 percent of the housing value is applied in calculating taxes but this will be raised to 90 percent. The tax rate will also be raised by between 0.25 percentage points to 1 percentage points.
People who hide real estate investment overseas will be levied penalties equal to 10 percent of the real estate's value. Currently, the penalty is 1 percent.
The tax revision puts priority on sustaining low-income households as they have been suffering from the sluggish job market and falling income.
The government plans to expand the earned income tax credit (EITC) scheme to effectively increase their income.
While 1.2 trillion won was offered to 1.66 million households in 2017, the program will be expanded to 3.8 trillion won benefiting 3.34 million households. Low-income households will also receive between 500,000 and 700,000 won per child as a tax credit, an increase of 200,000 won.
Businesses will receive tax breaks on investment into research and development into new technologies, but corporate and income tax cuts on foreign investments in free economic zones will be scrapped.
The government had promised to scrap the latter following the EU's inclusion of Korea in its non-cooperative tax jurisdictions last December. The EU claimed that the tax reduction discriminated against domestic companies.
The tax revision also backs up the administration's energy policy. Taxes on coal for power generation will be raised to 46 won per kilogram from 36 won, while taxes on LNG will be slashed to 23 won per kilogram from 91.4 won. This is part of efforts to decrease fine dust pollution.
The entry barrier will be lowered for duty free businesses, but those who are already operating duty free shops will be given opportunities to extend their licenses.
The government estimated that the revision will decrease the government's tax income by 2.5 trillion won over the next five years. The bill will be submitted to the National Assembly, Aug. 31.
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