Couples With Children to Get Tax Cut

Starting next year, singles and working couples will have to pay more tax while households with children will have their tax burden reduced.

Income tax imposed on child-less working couples with an annual combined income of more than 60 million won will rise by 220,000 won from this year’s level. Singles without children who earn more than 40 million won annually will see their tax rise as well by 170,000 won.

Meanwhile, the tax on households with two children which has a single income-earner making 50 million won a year will fall by 80,000 won.

This is the gist of the 2006 Taxation Revision that the Ministry of Finance and Economy announced Monday.

The revision will be voted on at the State Council on September 19 and submitted to the National Assembly on September 28.

According to the revision, starting next year, an additional income tax credit for small households will be abolished, and one will be given to households with children.

MOFE’s taxation official Hur Yong-suk said, “Among 4.75 million workers who have benefited from small household income tax credit, 4.3 million will have to pay more tax, but 2.2 million workers with two or more children will see their tax burden decrease.”

Also starting next year, pre-school children’s sports lesson fees, including taekwondo and swimming lessons, may be eligible for income tax credit as education fees. For two years starting this December, cosmetic surgery fees and herbal medicine fees may be deductible as medical fees.

Lawyers, doctors, and other highly-paid professionals will be obligated to use credit cards, have cash receipts issued, keep double-entry books, and open business-only accounts.

MOFE explained, “This taxation revision also aims to resolve the low birth problem.”

However, President Kim Sun-taek of Korea Taxpayer’s Association said, “[The revision] could reduce the disposable income of single workers, worsening the low birth rate.”

sanjuck@donga.com smhong@donga.com