(image: Kobiz Media / Korea Bizwire)
SEOUL, Jul. 31 (Korea Bizwire) — The central government has announced the general direction of the tax system reform set to be implemented next year.
For the first time in ten years, taxes will be lowered for many, while the wealthier portion of the population will end up paying more in taxes.
According to the proposed tax bill, tax revenues over the next five years will decrease by 2.5 trillion won. However, experts say that the effects of the tax cut will be far greater than the actual cut.
The last time a tax cut was implemented was in 2008, when then-President Lee Myung-bak put in place new laws to help large corporations by lowering corporate and income taxes.
The difference this time around is a focus on improving income distribution for the masses.
Via increased monetary incentives to be made available to working class workers and parents, the government is aiming for the tax cut to be felt by underprivileged demographics.
Following the new framework, tax will be assessed on profits of 20 million won and less from housing rentals.
Profit-making landlords who formally register their properties as businesses will be given tax benefits, but those who do not will have to pay 1.05 million won in taxes, according to the new proposed tax reform.
Tax deductions will also be granted for those working in certain sustainable industries.
Entrepreneurs that set up shop in regions that are undergoing an employment crisis will be exempted from all corporate and income tax for five years.
Research funds in key areas as blockchain and other advanced technologies will also be eligible for further tax incentives.
“(The tax reform) aims to create jobs for the working class in a way that does not burden the future,” said Kim Dong-yeon, the Minister of Strategy and Finance and deputy prime minister.
However, critics have said that the new measure lacks consideration of the current state of the economy. In addition, exactly how new jobs will be created is in question.
Meanwhile, the government will submit the revised proposal to the National Assembly after it is deliberated at the cabinet meeting next month.
H. S. Seo (hsseo@koreabizwire.com)
