[Opinion] Christmas and Taxes

In December, the last month of the year, Christmas trees commemorating the birth of Jesus Christ decorate the streets and carols fill the air. Although the atmosphere was subdued this year due to the novel coronavirus disease (COVID-19), the meaning of Christmas, celebrated every year, remains profound. Setting aside the religious background, the historical context of Jesus being born in Bethlehem of Judea is related to taxation.

The account of Jesus' birth as described in the New Testament is as follows: "The Roman Emperor Augustus issued a decree for a census of the entire world. Everyone went to their own town to register. Joseph also left Nazareth in Galilee and went to Bethlehem in Judea. While in Bethlehem, Mary gave birth to her child as her time came. Because there was no room at the inn, the baby was wrapped in swaddling clothes and laid in a manger."

Rome began as a small village in the 8th century BC and developed into a vast empire dominating the Mediterranean region for over 700 years, but internal conflicts intensified, leading to civil wars. Emperor Augustus (63 BC?AD 14) restored order and led Rome into a golden age later called the "Pax Romana," or Roman Peace. At age 32, he secured his position as the undisputed ruler and initiated reforms across governance, military, and administration. To reorganize the tax system, he conducted a population census called the "Census," requiring Roman subjects to register in their birthplace. This imperial decree for tax reform is the historical background for Jesus' birth in Bethlehem. The term "Census" is the origin of the modern population and housing census conducted in countries like Korea today. Subsequently, Augustus laid the foundation for revival through sound fiscal policy favoring a small government and a fair tax system that collected broadly but lightly.

Throughout history and across civilizations, the fundamental condition for sustainability in all economic units?be it states, religious organizations, businesses, or individuals?is financial soundness. Regardless of the domain, when the balance between income and expenditure collapses, cash flow deteriorates, threatening survival. For nations, sound fiscal management and rational tax systems are essential. Renowned economist Todd Buchholz, in "The Price of Prosperity," derived patterns of rise and fall of representative states from ancient Greece to modern Britain through the lens of economic scale and fiscal balance. Commonly, as economic prosperity lifts a nation out of poverty, an oversized bureaucracy emerges, producing regulations that hinder economic development. Politicians and bureaucrats, detached from reality and driven by ideology, collaborate to pressure the real economy, worsening fiscal conditions and increasing taxes. This vicious cycle dampens societal optimism and leads to decline. For example, during the Ming Dynasty in China, Confucian scholars disparaged merchants as parasites and expanded bureaucratic oversight to monitor and ultimately suppress them. Such policies are considered to have strangled the economy and internally caused the dynasty’s downfall.

From this perspective, concerns are growing that Korea is facing a crisis. Since the beginning of this year, the COVID-19 pandemic originating in China has inevitably caused an economic downturn. However, in the long term, the tax base had already been shrinking due to low growth and aging population. This means the public sector must transform into a low-cost, high-efficiency structure to balance revenues and expenditures. Nevertheless, apart from the temporary needs to respond to COVID-19, taxes are being raised across the board to finance the expanding public sector. Recently, with a sharp increase in real estate-related taxes, ordinary citizens owning homes lament, "If I try to sell, capital gains tax is frightening; if I just live in it, property tax is burdensome; and if I die, inheritance tax is scary."

Two thousand years ago, Emperor Augustus’ census led to Jesus being born in Bethlehem. The secular emperor led the community to prosperity through a rational tax system, while the heavenly savior saved people through the gospel. At Christmas, we reflect on the meanings of the secular and the religious, taxation and the gospel.

Kim Kyung-joon, Vice Chairman, Deloitte Consulting