Increase Rate of Earned Income Tax, 3.7 Times of Income Increase

As taxes have been raised faster than incomes of laborers, there are too heavy burden for laborers.

For collecting taxes from the wealthy classes, a nominal tax rate of inheritance tax and donation tax has been raised, but it doesn’t reach the increase on a standard of assessment. In other word, the burden of wealthy classes for taxes has been reduced.

According to materials for parliamentary inspection of the administration submitted by the ministry of finance and economy (MOFE) on September 16, when the actual income of laborers was 100 in 1996, it was 101.9 in 2001. On the other hand, the actual burden increase rate of earned-income tax increased to 107.1, raised by 3.74 times over income increase rate.

Supposing that laborer’s actual income was 100 in 1996, it decreased to △ 96.4 in 1997, △ 86.1 in 1998, △ 93.2 in 1999, and △ 95.0 in 2000, but increased to 101.9 in 2001 recovered to the level before a financial crisis. However, the actual earned income tax was 73.3 in 1999 and 94.7 in 2000, but increased to 107.1 sharply.

Supposing that the real GDP was 100 in 1996, it was 122.5 increased by 122.5% in 2001. That would make burden too heavy for income earners, but it kept away from the performance distribution by overcoming the financial crisis.

Besides, the nominal tax rate of donation tax and transfer tax has been raised to collect taxes from large property people, but the effective rate has been reduced. The effective rate of inheritance tax decreased to 31.1% in 2001 from 34.2% in 2000, and the effective rate of donation tax decreased to 28.8% in 2001 from 28.8% in 2000.

Kwang-Hyun Kim kkh@donga.com