Choo Kyung-ho: "Income tax for 30 million KRW salary earners down 27%... 100 million KRW earners down 5.3%"

"Corporate Tax Cut Reduces SME Taxes by 12%, Large Corporations by 10%"
Clarification on Large Corporation and Wealthy Tax Cut Controversy... "Why Would OECD Member Countries Lower Corporate Taxes If There Is No Economic Effect?"

[Asia Economy Sejong=Reporter Kwon Haeyoung] On the 25th, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho stated, "The tax reduction benefits from the income tax reform are relatively much greater for the middle and lower income groups, that is, the middle class and the lower-income households, rather than the high-income group." Emphasizing that the tax burden relief benefits from the corporate tax cut also go more to small and medium-sized enterprises than to large corporations, he actively clarified the controversy over the 'tax cuts for large corporations and the wealthy.'

Deputy Prime Minister Choo said in a meeting with reporters at the Government Complex Sejong on the same day, "A worker with an annual salary of 30 million won will see a 27% tax reduction compared to the current system due to this income tax reform, and a worker with a 100 million won salary will see a 5.3% reduction."

Visiting the Ministry of Economy and Finance press room that day, Deputy Prime Minister Choo presented specific examples of workers earning 30 million won and 100 million won annually, systematically refuting some claims that the income tax reduction benefits go more to high-income earners.

According to Deputy Prime Minister Choo, a worker earning 30 million won currently pays 300,000 won annually in income tax, while a worker earning 100 million won pays 10.1 million won annually. The 100 million won earner pays 34 times more tax. If the proposed tax reform is implemented, the tax will decrease to 220,000 won for the 30 million won earner and 9.56 million won for the 100 million won earner. Income tax will decrease by 27% and 5.3%, respectively, compared to before, and the tax multiple difference between the two groups will expand to 44 times.

He explained, "Currently, the tax paid by a 100 million won earner is 34 times that of a 30 million won earner, but after the law revision, it will expand to 44 times," adding, "Those earning 30 million won receive relatively more benefits, and the tax reduction effect is greater for lower-income groups." He also added, "For high-income earners with over 120 million won, the earned income tax credit was reduced by 300,000 won to prevent excessive benefits going to high-income earners." Furthermore, he emphasized that various income and tax credit benefits are provided and that the Earned Income Tax Credit (EITC) system has been expanded to provide an additional benefit of about 1.1 trillion won to low-income groups.

Regarding the corporate tax cut, he also made it clear that the benefits do not go only to large corporations. Deputy Prime Minister Choo explained, "Small and medium-sized enterprises will pay 12% less tax than before under this tax reform, and large corporations will pay 10% less," adding, "Relatively, more benefits go to small and medium-sized enterprises, so it is difficult to see this as a tax reform biased toward large corporations." He further explained, "For small and medium-sized enterprises, the low tax rate of 10% applied to the 200 million won taxable income bracket has been expanded to 500 million won," and "For large corporations, the tax rates have been simplified into two brackets of 20% and 22%. Previously, if profits were low, they only paid 10%, but now they will have to pay 20%."

Regarding the controversy over the trickle-down effect of the corporate tax cut, he retorted, "OECD member countries are competitively lowering corporate taxes, so if there were no economic effects, why would they reduce them?" The highest corporate tax rate among the 38 OECD member countries is 21.5%.

Deputy Prime Minister Choo said, "If there are countries with high corporate tax and countries with low corporate tax, companies will not go to countries with high corporate tax," adding, "(Corporate tax) is an element that companies have to bear, so if this burden is reduced, it will comprehensively appear in dividends, relationships with partner companies, employee wages, consumer price systems, and investment decision-making processes." He emphasized, "I believe that corporate tax helps expand investment, increase productivity, create jobs, and strengthen the competitiveness of our companies."