Public pension is subject to tax exemption

From next year, money paid for various public pension funds like National Pension Fund, Public Servant`s Pension Fund and Military Personnel`s Pension Fund will get tax exemption.

Also, those with over 45 million won in annual income would get a 5% deduction in earned income for the portion that exceeds this amount. Also, tax deduction for medical expenses would be raised to 3 million won annually from the current 2 million.

On the other hand, the tax rate for some energy prices will be increased substantially with the price of LPG for the purpose of transportation rising from 337 won per liter to 601 won in 2001 and the price of light oil from 604 won to 767 won from next year.

The Ministry of Finance and Economy announced September 4 that it will submit revision of 14 tax laws, including income tax law, to this year`s National Assembly.

The tax revision bill shows that the ministry plans to reduce the tax burden of the middle class by exempting a half of the money paid for public pension from next year and entirely from the year 2002. The limit for income tax deduction for money paid for pension fund will increase from the current 720,000 won to 2.4 million from 2001.

The ministry also intends to create local education tax to expand educational finance and extend the time limit for education tax through 2005.

The education tax added on cigarette consumption tax will be raised to 50% next year from the current 40%, so the price of cigarette will be increased by 130 won.

Considering the balance between light oil and LPG used for the purpose of transportation as well as replacement between kerosene and light oil, the ministry plans to raise the tax rate and prices substantially and levy tax on heavy oil which has so far enjoyed tax exemption.

At the same time, the ministry has decided to impose tax for all irregular capital transactions that are intended to avoid taxation. The phone tax will be integrated with vale-added tax to promote investment in information and communications industries. Of the 55 tax exemption regulations, 13 will be abolished, 10 will be reduced for extention and 32 will be extended.

The ministry officials said that tax income would increase by 7.5 trillion won in 2003 if the tax revision is implemented. Instead, 2.4 trillion won of tax revenue will be reduced through tax exemption for the money paid for pension. So, the net increase of tax revenue would amount to 5.1 trillion won, according to the officials.

The ministry had a meeting with the ruling party on September 4 to finalized the tax revision plan. But, the ruling party said that additional discussion is necessary regarding abrupt energy tax rate increase, so they will hold another government-party meeting on this question