[Tax Story] Controversy Over Disaster Relief Fund Criteria, Taxes Feel Wasteful

Professor Ahn Chang-nam, Department of Taxation, Kangnam University

Since it was said that 88% of the lower-income bracket would be eligible for the payment, I thought my car and house prices might not qualify, so I inquired just in case, but when I heard the answer was 'not eligible,' I just laughed it off. Assessing an individual's economic capacity with a crude standard and ranking them only complicates the situation, and spending money can lead not to praise but to criticism.

Judging by the surge in appeals from those excluded from the payment, I believe the first round of payments (universal) implemented for the entire population was wiser. When citizens received disaster relief funds feeling embarrassed and apologetic, they were notified that 'if you do not receive it, it will be considered a donation.' Although it reminded me of Colbert, the finance minister under Louis XIV of France, who devised a way to collect taxes by 'causing less pain to the goose,' it contained concern for national finances and consideration for taxpayers, leading many citizens to donate, including myself.

However, this fifth round of support lacks even such gestures. It is more like 'take whatever is given.' Many people in this country support disaster relief payments but also worry about the soundness of national finances. Perhaps because donations were low during the first payment, the donation system was omitted this time. But if the donation results fell short of government expectations, did they even try to find alternative methods?

As Pascal said, humans have a 'logic of the heart' different from 'mathematical logic,' so the sum of parts (1+1) may not equal the whole (2). The sum of irresponsible individuals is less than the whole, but the sum of responsible individuals can be greater than the whole. As the history of capitalism accumulates on this land, 'clean rich people' are emerging, and many citizens have a 'good will' to realize a virtuous community. It is the government's role to sincerely convey this intention to them and unite them in one place. If good motives are induced, many more citizens are likely to donate than in the first round. Considering national fiscal soundness, I believe it is necessary to link disaster relief funds with donations even now.

The scale of the fifth disaster relief fund (COVID-19 coexistence support fund) is 11 trillion won. This is an enormous amount similar to the capital gains tax paid by 600,000 people in 2019. But if that money is only used for 'eating beef' or 'buying luxury goods,' who would willingly and happily pay taxes? Controversies arise over eligibility for disaster relief payments, and administrative costs are incurred to resolve them, which ultimately must be covered by taxpayers. Isn't it a waste of taxpayers' money to spend on this?

We must find the optimal balance between the two different propositions of disaster relief support and maintaining national fiscal soundness. How? There is already a system where if an individual donates 100,000 won to political contributions, 110,000 won in taxes is deducted (100,000 won from national income tax, and 10% of that, 10,000 won, from local income tax). Would it be rude to ask the political sphere, which devised this method where the tail is bigger than the belly, to show their skill once again?

Support funds for disasters that have struck the entire Korean Peninsula, not specific regions or classes, should be targeted at the entire population. Considering the reality that the top 12% pay most of the taxes (according to the National Tax Statistics Yearbook, in 2019, the top 10% bore 72.5% of earned income tax), support should also be provided to them, but incentives (income deductions) should be offered to encourage donations exceeding the support amount. Donations and taxes are two sides of the same coin; the more individual donations, the less the national tax burden.

Changnam Ahn, Professor of Taxation, Gangnam University