Income Tax Rate Declines by One Percent

It is analyzed that a head of a family of four who earns 30 million won annually will pay 19 percent less in income tax starting from next year.

According to the National Tax Service and the tax accountants, when the tax system improvement agenda made by Finance and Economy Committee becomes effective from next year, a worker with a wife and two children (one kindergarten and one elementary school) earning 30 million won a year will pay 787,250 won in income tax. It is 179,750 (18.6 percent) less than this year’s 967,000 won.

This calculation was done not by receiving a special deduction but by receiving a standard deduction and applying the basic deduction of four million won. Looking in detail, the income tax is the same for this year and next year (12.25 million won), and the taxable income is also the same (17.75 million won).

However, as the standard deduction has increased from 0.6 million won to one million won, the taxable standard will decrease from 13.15 million won to 12.75 million won.

On top of this, with a one percent lower income tax rate, taxes have decreased. Applying this, a 40 million won earner will only pay 2,297,500 won next year, 289,500 won (11.2 percent) less than this year.

Also, a 50 million won earner will pay 3,870,000 won from this year’s 4,252,000 won, 382,000 won (nine percent) less.

Jae-Seong Hwang jsonhng@donga.com