Gov’t Will Lower the Income Tax

The government has decided to proceed with a plan to lower the income tax rates and to increase the deductions and exemptions as well as the tax credit in order to ease the tax burdens for the middle and the lower income brackets. The tax incentives, such as the benefit of reduction in the corporation tax, will be granted to companies that are under the structural adjustment, regardless of a time limit.

Ministry of Finance and Economy and Korea Institute of Public Finance held a tax review committee meeting yesterday at the Korea Federation of Banks headquarters in Myong Dong, Seoul, attended by Jin Nyum, Deputy Prime Minister and Finance & Economy Minister, and presented the report on the `Plan for the Tax system reform, 2001` and the `Direction for the mid- and long-term tax system operation`.

The taxation system reform plan will lower the standard of 40 million won to impose the heavier income taxes on people who earn money through savings and other financial instruments, and will also lower the withholding tax rates. Married couples whose global financial income exceeds 40 million won are currently subject to the accumulative global financial income tax. The government plans to reduce the tax exemptions on partial income. It also plans to reduce the overall tax rates, such as the corporation tax and the income tax.

The government decided to legislate a law related to the tax system reform in June and September meetings of the National Assembly. The mid- and long-term tax reform plan (5 ~10 years) will be completed by the end of the year through the hearings of the public opinion.

- Plan for this year: Lee Yong-Sup, director general for tax and customs at the Ministry of Finance and Economy, said, ``We`ll submit a draft revision calling for a cut in income tax rates for the middle and lower income bracket in the National Assembly in September.`` He also stated that he would hammer out the measures to reduce the income tax rates and to expand the tax credits.

The government has decided to revise the related laws in the National Assembly in June to increase `the 10 percent income tax break or 3 million won` on the workers’ credit card usage to `the 20 percent or 5 million won`.

- Mid- and long-term plan: The government plans to introduce a standardized tax system in which virtually all inheritance, gift and income items would be subject to similar levels of tax. The government also plans to introduce a new approach to the inheritance taxation system, which is `taxation based on acquisition`. The inheritance taxation is currently levied based on the total amount of inheritance. The government decided to cut the acquisition and registration taxes for real estate, while raising property and capital gains taxes.

Kwon Soon-Hwal shkwon@donga.com