ID :
22829
Mon, 10/06/2008 - 09:12
Auther :
Shortlink :
http://m.oananews.org//node/22829
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S. Korea`s higher taxes fail to bridge wealth gap: report
SEOUL, Oct. 6 (Yonhap) -- South Korea's increased tax burden over the past decade has not been effective in reducing the nation's growing polarization of wealth, a government report said Monday.
The country's net tax burden rose from 17.5 percent in 1998 to 22.7 percent as of
2007, but the income gap between haves and have-nots has widened, the Ministry of
Strategy and Finance said in the report to the National Assembly.
Although more taxes were collected during the period, the Gini coefficient, which
measures the inequality of income distribution, actually worsened from 0.344 in
2004 to 0.352 last year.
A reading of zero translates into complete income equality, while higher numbers
nearing one indicates a widening gap in earnings between rich and poor.
"The widening gap is one reason why the Lee Myung-bak administration is moving to
cut taxes in order to breathe new life into economy that can lead to more jobs
and growth," the ministry said.
According to the report, the 5.2 percentage point hike in taxes over the past 10
years is much higher than the average 0.1 percentage point gain tallied for other
Organization of Economic Co-operation and Development (OECD) members.
The ministry, meanwhile, told lawmakers that half of all salaried workers did not
pay income taxes because they earned less than the minimum taxable level, while
37.5 percent of self-employed businessmen had been exempt from taxes as of 2006.
Of the 12.34 million salaried employees, 6.72 million, or 50.4 percent, did not
pay taxes, while taxes were not levied on 1.71 million out of 4.58 million
self-employed workers.
The Finance ministry added that calls by the main opposition Democratic Party
(DP) to reduce value-added tax (VAT) rates to 7 percent from the present 10
percent is not being considered since it went against global trends and would
make it hard for Seoul to finance spending.
The office said the VAT rate of 10 percent was lower than the OECD average of
17.7 percent.
The opposition DP has opposed the current government's move to reduce real-estate
holding taxes that would favor the rich, countering with a call for VAT
reductions that would benefit all consumers and help control inflationary
pressure.
The country's net tax burden rose from 17.5 percent in 1998 to 22.7 percent as of
2007, but the income gap between haves and have-nots has widened, the Ministry of
Strategy and Finance said in the report to the National Assembly.
Although more taxes were collected during the period, the Gini coefficient, which
measures the inequality of income distribution, actually worsened from 0.344 in
2004 to 0.352 last year.
A reading of zero translates into complete income equality, while higher numbers
nearing one indicates a widening gap in earnings between rich and poor.
"The widening gap is one reason why the Lee Myung-bak administration is moving to
cut taxes in order to breathe new life into economy that can lead to more jobs
and growth," the ministry said.
According to the report, the 5.2 percentage point hike in taxes over the past 10
years is much higher than the average 0.1 percentage point gain tallied for other
Organization of Economic Co-operation and Development (OECD) members.
The ministry, meanwhile, told lawmakers that half of all salaried workers did not
pay income taxes because they earned less than the minimum taxable level, while
37.5 percent of self-employed businessmen had been exempt from taxes as of 2006.
Of the 12.34 million salaried employees, 6.72 million, or 50.4 percent, did not
pay taxes, while taxes were not levied on 1.71 million out of 4.58 million
self-employed workers.
The Finance ministry added that calls by the main opposition Democratic Party
(DP) to reduce value-added tax (VAT) rates to 7 percent from the present 10
percent is not being considered since it went against global trends and would
make it hard for Seoul to finance spending.
The office said the VAT rate of 10 percent was lower than the OECD average of
17.7 percent.
The opposition DP has opposed the current government's move to reduce real-estate
holding taxes that would favor the rich, countering with a call for VAT
reductions that would benefit all consumers and help control inflationary
pressure.
