“Korea’s tax deduction policies are family-centered, with a tendency to focus predominantly on policies promoting fertility,” the researchers noted. (image: Flickr/ 401(K) 2012)
SEOUL, Nov. 23 (Korea Bizwire) – No tax specific to single-person households currently exists in Korea. But a recent study found that various tax benefits provided to married couples with children, mainly as countermeasures to Korea’s low marriage and birth rates, are creating an equally viable effect, imposing higher tax burdens on Korea’s single population.
The study, compiled by University of Seoul professor Lee Young-han and certified public accountant Lee Yun-joo, was based on a paper by the Korean Academic Society of Taxation, analyzing the income, consumption, and taxation data of 4,819 households and their 7,586 members.
The researchers found that among medium wage earners (40 million to 60 million won per year), the effective tax rates were 1.24 percent for families with two children and one working parent, 2.53 percent for families with one child and a working parent, and 2.88 percent for single-person households, indicating that single-person households were on average paying 790,000 won ($672) in additional taxes compared to families with two children.
More specifically, those living alone were imposed 0.34 percent in extra taxes for not being married, and 1.3 percent for not having a child, the study noted, compared to two-children family with one working parent. The rate was also higher by 0.35 percent compared to a married couple with no children and one working spouse, with the researchers adding that the gap between tax rates widens as the number of children in a family increases.
“Korea’s tax deduction policies are family-centered, with a tendency to focus predominantly on policies promoting fertility,” the researchers noted. “Because single-person households have relatively higher tax burdens, it is safe to say that there is, in fact, taxation on single-person households.”
The study also suggested that while society approves of policies promoting childbirth, continuing to provide tax incentives as a core strategy could lead to involuntary resistance from single-person households, and proposed a greater variety of benefits other than tax deductions, such as cash grants, be introduced.
The number of single-person households is rapidly increasing in Korea. In 2015, there were 5.11 million single-person households, accounting for 27.1 percent of all households. The percentage is expected to increase to 34.3 percent by 2035.
By Lina Jang (linajang@koreabizwire.com)
