[2024 Tax Revision] 4.3 Trillion KRW Tax Burden Reduction Over 5 Years... Yoon Administration's 3rd Consecutive Year of 'Tax Cuts'

"Focused on Benefiting Low-Income and Middle-Class Citizens"

The tax law amendment announced by the government on the 25th focused on promoting corporate investment and employment, as well as normalizing the outdated tax system. It is expected that various tax support measures will result in a reduction of tax revenue exceeding 4 trillion won over five years, with the benefits of reduced tax burdens likely to be distributed more to low- and middle-income groups.

[Image source=Yonhap News]

The government estimated that the tax revenue will decrease by a total of 4.3515 trillion won over five years from next year to 2029 due to this year's tax law amendment. This calculation is based on the net method comparing with the previous year (2024).

According to the net method, the 2022 and 2023 tax law amendments resulted in tax revenue reductions of 13.1 trillion won and 471.9 billion won respectively, marking three consecutive years of reduced tax burdens under the Yoon Suk-yeol administration up to this year.

This year's amendment saw the largest tax burden reduction effect of 4.0565 trillion won due to inheritance tax revisions. Income tax and corporate tax reductions were 455.7 billion won and 367.8 billion won respectively. On the other hand, value-added tax (VAT) is expected to increase by 365.6 billion won due to adjustments in VAT credit rates for credit cards and other factors, contributing to the expansion of the revenue base.

The biggest beneficiaries of this tax law amendment are expected to be low- and middle-income groups. According to the Ministry of Economy and Finance's estimated tax reduction benefits (tax burden allocation), low- and middle-income earners with total annual salaries below 84 million won are expected to see a reduction effect of 628.2 billion won over five years. This is about 6 to 7 times the benefit allocated to large corporations (91.7 billion won).

High-income earners are expected to see a tax reduction effect of 166.4 billion won, while small and medium-sized enterprises and large corporations are expected to benefit from tax reductions of 239.2 billion won and 91.7 billion won respectively. Additionally, other sectors where allocation analysis is difficult, such as foreigners, non-residents, and public interest corporations, are estimated to experience a tax reduction effect of 3.226 trillion won. The Ministry of Economy and Finance explained that the unusually high proportion of "others" this year is due to classifying the entire tax revenue effect from this year's inheritance tax revision as "others."

By year, the tax reduction effect is expected to be largest in 2026 (3.8833 trillion won), followed by 622.7 billion won next year, 388.8 billion won in 2027, 875.6 billion won in 2028, and 332.3 billion won after 2029.