Ex-Ruling Party Chief Park Balks at Income Tax Cut

Former ruling Grand National Party Chairwoman Park Geun-hye urged the government Monday to cancel the planned reduction of the country`s highest income tax rate.

At a meeting of the National Assembly’s Strategy and Finance Committee, she said, “In the aftermath of the global financial crisis, national fiscal soundness has deteriorated and income disparity has widened. The maximum income tax rate must be retained while the maximum corporate tax rate should be lowered as planned.”

Her demand has added fuel to the intra-party dispute over cuts in tax rates. Party leader Ahn Sang-soo also hinted at partially revising the tax cut plan, so how the party will finalize its stance remains to be seen.

The incumbent administration is sticking to a policy of corporate and income tax cuts to expand the number of tax revenue sources. Under a revision to tax law approved by parliament last year, the tax rate for individuals earning more than 88 million won (77,400 U.S. dollars) will fall 2 percentage points to 33 percent from 2012.

The corporate tax rate will also be lowered 2 percentage points to 20 percent for a tax base of greater than 200 million won (181,000 dollars).

Park said the income tax rate of 35 percent should be maintained while the corporate tax rate should be cut as planned.

Ahn said, “We will examine imposing the maximum tax rate of 35 percent for certain income brackets while reducing those for the other brackets. To this end, the government’s plan to keep the maximum tax at 35 percent can be maintained.”

Strategy and Finance Minister Yoon Jeung-hyun said, “The government’s stance on lowering taxes remains unchanged. Since the tax plan will be applied from 2012, the matter can be decided at the regular parliamentary meeting next year.”

The ruling party’s chief policymaker Ko Heung-kil said, “We will discuss this matter at the policy meeting next Monday and finalize our stance.”

surono@donga.com