Here is just another example of how South Korea is following the same road the US has gone down where people want government services without paying more in taxes and politicians keep promising that they can do this:
Civic groups hold a rally after the government scaled down support for pension plans and health care promised during the 2012 presidential election. (Yonhap file photo)
If broader welfare without a tax hike sounds too good to be true in a country where people live longer and give birth to fewer babies in an era of slow economic growth, it probably is.
Taking office two years ago with the promise of more social welfare, President Park Geun-hye said she will dig up the underground economy for tax revenue and eliminate unnecessary spending to finance welfare programs, such as child care, college tuition support and a pension plan for seniors.
So far, the government has done little to show results.
Considered too unrealistic by many economists from the outset, and even questioned by her own party, Park’s welfare goal may be derailed as her administration comes under growing pressure for a tax overhaul to meet growing demand for a better social safety net.
The government came under fire for its clumsily patched year-end tax adjustments that resulted in several tax deductions and other tax breaks being scrapped, diminishing the amount of tax refund for salaried workers and, in some cases, forcing them to cough up more. Officials defended the new system as having been designed to “collect less, return less,” but taxpayers blamed the government for tweaking the tax code to deliberately raise the burden on the middle class.
The government apparently lost the argument. President Park’s popularity rating dipped to a record-low 29 percent last week.
The extra cash from the tax refund may be small in amount, but coming after a sharp surge in tobacco prices and the ongoing push for residential and auto tax increases, the strong resistance forced the finance minister to apologize and the tax office to return part of the taxes retroactively, the first such move.
The tax refund fiasco is just one example of mixed challenges faced by Asia’s fourth-largest economy, which is struggling to strike a balance between a budget shortfall and rising welfare costs from the rapidly increasing elderly population.
Now nearing the midpoint of her single, five-year term, Park needs to make a critical political decision: raise taxes or discard welfare pledges, experts say.
“People were enraged because they felt the government lied about not raising taxes,” Shin Yul, a political science professor of Myongji University, said. “Welfare without tax increase was not a realistic goal from the beginning. If the government does not acknowledge this simple fact and sticks to its oxymoronic pledge, it would result in an early lame duck.”
South Korea’s tax rate is equal to 20 percent of the gross domestic production (GDP), lower than the Organization for Economic Cooperation and Development (OECD) average of 25 percent, while its public welfare budget is just half of the OECD average at 10 percent of the GDP. [Yonhap]
You can read more at the link, but to complete this cycle the next thing politicians will likely do is turn to blaming rich people for not paying their fare share.
