Tax code revision

Next year's plan should aim at stabilizing economy


The Ministry of Economy and Finance unveiled revised tax codes for next year Thursday, fixing tax rates and projected revenue amounts for each category. The 2020 tax revision bill mainly aims at raising taxes on high-income earners while reducing the burden on companies reeling from the slowing economy.

Regrettably, the plan doesn't provide bold tax breaks to jumpstart the dormant economy; and, it also stopped short of raising the overall revenue target, despite the continuously increasing government budget, considering the economic difficulties most people are experiencing.

Next year, the government will likely provide most of the tax benefits to firms that invest and hire employees. It will, for instance, raise tax credits for corporate investment into plants and equipment from 1 percent to 2 percent for large enterprises, and from 7 percent to 10 percent, for small businesses. High-income earners, on the other hand, will see their tax burden increase. People who earn 362.5 million won or more a year will have to pay higher taxes.

The business community had anticipated far bolder tax breaks, given the increasingly gloomy economic outlook from both public and private think tanks. This was not in the revised plan, however. Instead, the ministry lowered its revenue target a little, reflecting the poor economy.

This was also the first time the government took into account dwindling revenue in revising the tax codes for two consecutive years row, indicating the pessimistic economic projections among policymakers.

Revisions to the tax code usually start almost a year before based on the analysis of each category criteria and the economic reality. As the revised plan will be maintained for several years unless the government amends it, it should be made as a mid- to long-term plan.

At a time like the present, when external conditions are changing unexpectedly ― including Japan's economic provocation ― it is difficult to amend a policy drastically. It will be of help to keep the basic framework intact. While carefully watching significant trends such as the ongoing trade friction with Japan, policymakers are advised to focus on the minutiae in realizing tax justice.