Park Administration Keeps Promise of Not Raising Taxes By Instead Eliminating Deductions

Could you imagine what the outcry in the US would be if tax deductions such as for children and mortgage interest were eliminated?:

Many salaried workers will be disappointed with their year-end tax settlement for 2014. Tax refunds are expected to shrink after tax code revisions made in 2013 went into force this year.

Some are even angry because they have to pay additional taxes. Their monthly deductions didn’t cover the amount they owe under the new tax laws.

Mr. Kim, a 33-year-old married worker at a conglomerate who has no children yet, breathed a sigh of relief after he learned that he will receive a tax refund of 430,000 won ($400) this year. Kim’s salary has been fixed at 37 million won since 2013, but his estimated tax refund is almost half of that last year.

“I feel lucky because at least I don’t have to pay more,” he said. Many of my superiors are panicking because they found out they owe taxes.”

Mr. Park, a senior manager at another conglomerate, is upset. Park used to receive about 800,000 won in tax refunds. He was taking care of his retired parents, but last year his younger brother decided to look after them. As a result, Park is no longer eligible for the tax deduction for taking care of his parents. As a result, his total tax refund this year sharply dropped.

“I heard from our finance team that I might end up paying an additional 1 million won in taxes,” he said.

Since the National Tax Service opened its website for year-end settlements on Jan. 15, complaints are exploding among office workers and other company employees.

In July 2013, the former economic team of the Park Geun-hye administration led by Finance Minister Hyun Oh-seok announced a tax reform plan.

Its main idea was to do away with deductions from taxable income of spending in four areas: education, medicine, charitable donations and insurance premiums, including the national pension system.

Under the new system, those forms of spending will instead be deducted at a new rate from tax owed, not from taxable income as a whole.

They are the major income tax deductions in Korea.

The measure was aimed at raising government revenues amid an economic slowdown, while keeping the president’s promise that the government wouldn’t raise tax rates.  [Joong Ang Ilbo]

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