Starting next year, the income tax of workers earning 78 million won per year will be reduced by an average of 540,000 won. The corporate tax burden of companies with a tax base of 500 million won will be lowered by 30 million won from the current level. The comprehensive real estate tax applied to multi-homeowners since 2019 will be abolished for the first time in four years.
The Ministry of Economy and Finance held the Tax Development Deliberation Committee at the Bank Hall in downtown Seoul on Thursday and finalized the “2022 tax reform plan” with the above content contained. “The government is concentrating all its economic policy capabilities on stabilizing people's livelihoods and restoring economic vitality,” the ministry said. “And to support this goal, we will implement drastic improvements in the tax system as well.”
A key to the Yoon Suk-yeol administration's first tax reform is a 'large-scale tax cut.’ As for income tax, its tax brackets will change for the first time in 15 years since 2008. While leaving the eight tax brackets as they are, the bottom two brackets will be raised by 2 million won and 4 million won, respectively. The overall income tax paid by workers will be reduced by changing a 6-percent tax rate bracket to 14 million won or less and a 15-percent tax rate bracket to 50 million won or less. For instance, for an employee with a total annual salary of 78 million won, the income tax burden is expected to decrease by up to 830,000 won, including the increase in the maximum of 200,000 won per month for meals considered tax free.
The highest corporate tax rate will be lowered to 22 percent again for the first time in five years, and the current stage four tax brackets will be reduced to two or three. The heavy taxation rate of the comprehensive real estate tax levied on multi-homeowners introduced by the former Moon Jae-in government will be abolished, and the tax rate will be applied only according to tax brackets regardless of the number of houses owned. The basic tax rate itself, which is currently 0.6-3.0 percent, will also be lowered from a minimum of 0.5 percent to a maximum of 2.7 percent
With this tax reform, the tax burden on the working and middle classes, and small and medium-sized enterprises will be reduced by 2.2 trillion won and 2.4 trillion won, respectively. In addition, the tax burden for large corporations and high-income class will be reduced by 4.1 trillion won, and 1.2 trillion won, respectively. This would reduce the government’s tax revenue by 13.1 trillion won over the next four years.
However, significant barriers are expected until the bill passes through the National Assembly and becomes legalized. “Our party will do everything within our power to prevent the national finances from shrinking due to corporate tax cuts, etc. where benefits will be enjoyed by a small number of conglomerates,” said Floor Leader Park Hong-geun of the Democratic Party of Korea at a parliament speech last month.
Hee-Chang Park firstname.lastname@example.org · Hye-Ryung Choi email@example.com