Lotto 1000th Draw Today... Highest Ever Jackpot and Taxes

An elderly person visiting a Lotto sales store is carefully coloring the number blanks with earnest hope. Photo by Mun Ho-nam munonam@

[Asia Economy Reporter Moon Hyewon] Lotto (online lottery), synonymous with 'instant fortune,' will hold its 1000th drawing on the 29th.

According to the Ministry of Strategy and Finance's Lottery Commission and the lottery operator Donghaeng Lottery, from the 1st draw (December 7, 2002) to the 943rd draw (December 26, 2020), the average number of first prize winners per draw was 7, with an average prize of 2,042.9 million KRW. The highest prize ever awarded was 40.72296 billion KRW.

On average, 7 first prize winners have been drawn per lotto draw so far. They have each received an average fortune of about 2 billion KRW.

For the second prize, an average of 42 winners received 57.6 million KRW, and for the third prize, an average of 1,590 winners received 1.5 million KRW.

The fourth and fifth prize amounts are fixed at 50,000 KRW and 5,000 KRW respectively. The average number of winners is 78,275 for the fourth prize and 1,281,029 for the fifth prize.

However, under the Income Tax Act, lottery winnings are classified as 'other income,' so even if one wins the average first prize amount of 2 billion KRW, they cannot take the entire amount home.

Winnings up to 50,000 KRW are tax-exempt, but amounts exceeding 50,000 KRW are subject to a 20% income tax, and amounts exceeding 300 million KRW are taxed at a rate of 30%.

Additionally, a local income tax amounting to 10% of the income tax is imposed, making the effective tax rates 22% and 33% depending on the bracket.

For a 2 billion KRW prize, 300 million KRW is taxed at 22%, resulting in 66 million KRW in tax, and the remaining 1.7 billion KRW is taxed at 33%, resulting in 561 million KRW in tax.

The total tax amounts to 627 million KRW. Therefore, if one wins a 2 billion KRW first prize in the lotto, the actual amount received after tax is 1.373 billion KRW.

The second and third prize winnings are taxed similarly: 22% up to 300 million KRW and 33% on amounts exceeding 300 million KRW. The fourth and fifth prizes are below 50,000 KRW and thus are not taxed.

Meanwhile, lotto winnings are paid out from sales revenue. About half of the sales revenue goes toward issuance costs, sales and consignment fees, and the lottery fund, with the remainder used for prize money. In the first half of last year, out of 2.9392 trillion KRW in sales, 1.5153 trillion KRW was paid out as prize money. This means that about 500 KRW out of every 1,000 KRW spent on lotto purchases is used for prize payouts.

A Lottery Commission official explained, “The lottery fund generated from lotto sales is used as resources for the Housing and Urban Fund, Veterans Fund, Cultural Arts Promotion Fund, and for public interest projects such as support for families of adopted children, treatment and rehabilitation support for children in welfare facilities, and scholarship programs for low-income groups.”