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[Editorial] Burdensome New Year for Workers

Posted December. 21, 2005 03:00,   


Next year, the payroll tax of 6.3 million workers will increase by 10.6 to 29.9 percent from this year’s. The actual payroll tax per worker must have the year-end tax adjustment coordination to figure out the exact amount, but it is said to rise four times that of next year’s expected income growth rate of 7.2 percent. It would definitely be a great burden for ordinary workers.

Even worse, the tax increase for low-income earners would be bigger. The payroll tax for a worker whose monthly wage is three million won this year (responsible for a household of four) would rise by 29.9 percent next year, given the average wage increase rate. The effective tax rate –the ratio of real payable tax against income – of this income group would increase from 3.3 percent this year to 4.0 percent next year. This is because tax benefits such as extra deductions have been eliminated to collect more tax. The government favoring to show numbers as it calls itself, “a government for the ordinary people and the middle class,” avoided the point by saying, “The effective tax rate is still high for the high income class.”

The payroll tax increase for the comparatively high-income earners is not small at all. The tax increase for a worker earning five million won and seven million won a month is 16.6 percent and 13.9 percent, respectively. The payroll tax increase for this class is more than twice that of the income increase rate. Thus, the effective tax rate for a worker earning five million won a month would increase from 8.2 percent to 9.0 percent, and for a worker earning seven million won a month, from 12.6 percent to 13.4 percent.

Unlike the self-employed or those with asset income, ordinary workers have their income exposed as it is and pay withholding tax. Workers have to pay more than twice what self-employed pay although the expenditure of the former is much smaller than the latter. People have continued to complain about no signs of economic turnaround, but the government keeps collecting additional payroll tax. The additional rate is 19 percent for last year and 12 percent for this year. The government’s excessive efforts to collect tax – much easier than the tax equity policy – have brought about this regrettable result.

The government keeps announcing “reforms,” but not so for the tax equity reform. What it does is give a divisive populist remark on the Grand National Party’s tax reduction bill, saying, “Tax reduction will be only good for the rich who have continued paying tax.” Does it mean that it is only good for more people that the government spends more from tax and only good for the rich that the same amount of money is invested and spent by the private sector? Nonsense. It is more so as the government keeps wasting the tax revenue.