Ruling Party Proposes More Tax Reforms

The ruling Grand National Party will ask the government to lift the ceiling of the earned income tax credit from 800,000 won to 1.2 million won per year.

In addition, the party will push for a one-year delay in lowering the highest corporate tax rate and the introduction of tax breaks on donations to colleges.

“We will urge the government to adopt the following six tax reforms in a senior government-ruling party meeting Monday,” chief policymaker Lim Tae-hee told reporters yesterday.

The party will seek to increase the maximum earned income tax credit given to 310,000 working families with an annual income of less than 17 million won. Moreover, it wants to allow low income earners with a small house to be eligible for the credit.

The party will also seek to delay a cut in the highest corporate tax rate of 25 percent, which mainly applies to conglomerates, from this year to next year. A total of 1.8 trillion won to be saved from the delay will go to the stabilization of the people’s livelihood and restructuring of the transportation industry.

On tax exemptions on charitable contributions to colleges, the party will suggest either a full tax refund for donations of up to 100,000 won per person or up to a 50 percent refund, while increasing the maximum deductable amount.

Furthermore, it will propose extension of the special tax benefit period, which ends this year, to 2010 for individual investment in venture companies and investment funds and for value-added taxes on restaurants.

The party will also seek to inject financial resources secured from delaying corporate tax cuts to supply city gas to less developed areas by expanding and maintaining gas pipelines.

“Our six demands were not met in the process of drafting the tax reform bill,” said Lim. “I will bring them up in Monday’s government-ruling party meeting one last time to make sure they are fully reflected.”

koh@donga.com