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The People... “Only Sighs Are Being Heard”

Posted November. 26, 2004 22:56,   


Mr. Choi (34), an office worker who owns a 25-pyong apartment, says that his temper rises every time the subject of taxes comes up.

This is because the possession tax for an apartment, the property tax and aggregate land tax (including value added tax), which was 163,420 won last year, has leapt to 208,790 won this year. Next year, the possession tax system will be modified, and he will pay about 20 percent more than this year.

Mr Choi said, “Even though wages are at a standstill due to the economic recession, taxes are increasing which consequently discourages me from working.”

As the economic recession goes into the long run of its course, the weight of taxes and social insurances such as national pensions and health insurance is quickly growing heavier, and as a result the tax burden felt by the people is increasing.

Furthermore, comprehensive real estate taxes will be introduced next year, and the burden for high-priced apartments densely populated in the metropolitan areas will further increase.

According to the “tax revenue estimations and tax system analysis” report by the National Assembly Budget Office publicized on November 26, the nominal gross domestic produce (GDP) has increased by an annual average of eight percent, from 529.5 trillion won in 1999 to 721.3 trillion won in 2003.

However, during the same term, the tax revenue has increased by 11.9 percent annually, from 94.2 trillion won to 147.8 trillion won.

As a result, the tax burden rate has also increased by 2.7 percent from 17.8 percent in 1999 to 20.5 percent in 2003.

Additionally, the burden rate of the sum of taxes and social insurances such as national pension and health insurance has increased 3.9 percent, from 21.5 percent to 25.4 percent.

This suggests that the burden of taxes and social insurances are more rapidly increasing than the increase of national income.

Such increasing speed in the burden rate is the highest among the Organization for Economic Cooperation and Development (OECD) members.

Even though the tax burden rate will slightly decrease this year and the next, due to the drop in the corporate tax rate and the special consumption tax rate, it is anticipated that starting in 2006, it will increase.

On top of that, the economy is in a recession and the tax resistance of taxpayers (for example, the “property tax crisis”) is growing stronger.

Also, as the possession tax burden is expected to further increase due to the tax system reform, a second property tax crisis is anxiously anticipated.

Ok Dong-seok, a professor of public finance at the University of Incheon, explained, “If we apply the standard of developed countries and include taxes and also semi-tax burdens such as administrative fees, Korea’s tax burden rate will be higher than the government statistics and closer to the OECD average (27.3 percent),” and added, “The excessive burden of taxes may diminish the economic activities of the private sector.”

Yong Park parky@donga.com