Income Differential Has Widened Since Money Crisis

The experts prospected that the income differential has continuously broadened since the money crisis, and this tendency will continue due to the increase in the incomes of the high-salary earners.

The Korea Institute of Public Finance (KIPF) reported yesterday to the President Kim Dae-Jung `the Taxation Reform For the Improvement of Income Distribution`.

The report told that ``the income differential has become bigger due to the worsened economy and the development of information technology industry and the introduction of piecework system. The income gap between the middle and high income classes has had more impacts on the increase of the overall income differential rather than the income gap between the middle and low income classes``.

Especially, the report analyzed that ``the Gini coefficient has risen due to the increase of the annual salary of the small number of professional workers, who are placed in top 1-3 percent in the salary ranking of the financial business and information technology industry. And thus the income differential structure is likely to shift to the form of the advanced countries``.

The report said that ``the government should seek to compliment the weak points in the consolidated taxation for the financial incomes, to revise the taxation related to the real estate and the donation tax, and to cut down the tax exemption and the tax reduction in order to prevent the over-expansion of the income differential``.

Based on such an analysis, the KIPF suggested the government to gradually lower the standard amount of the consolidated taxation, and to expand the application range of the consolidated taxation. And the tax exemption, tax complimentary savings, and separation taxation savings should be revised in order to attribute the actual benefits to the low income class and to prevent the high income class from evading the consolidated taxation, said the KIPF.

Finally, the KIPF pointed out that the government should gradually cut down the transaction taxes such as an acquisition tax and a registration tax among the taxes related to the real estate, and it should and change to the taxation system focusing on the holding tax.

sanjuck@donga.com