Concerns Over Tax Increase for Convenience Stores and Chicken Shops Due to Tax Reform... 'Stores Avoiding Deficit Face 3.25 Million Won Tax Hike'

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신용카드 공제 축소로 인해 세금 크게 늘어Significant Tax Increase Due to Reduction in Credit Card Deductions>

At a National Assembly audit, concerns were raised that next year's tax law revisions by the government would impose a tax burden on convenience store and chicken restaurant owners. The government plans to lower the credit card tax credit rate, which was promoted to normalize the tax base, as the policy goal has been achieved. However, there are concerns that taxes could sharply increase for convenience stores, which have high sales but low profits, leading to expected heated debates during the tax law review process.

On the 10th, at the Ministry of Economy and Finance audit held at the government complex in Sejong City, Cha Gyugeun, a member of the Innovation Party, pointed out problems with the government's "reduction of the credit card value-added tax (VAT) credit rate." Cha said, "Looking at the cumulative method, all tax items are on a tax cut trend, but there is a tax item where revenue increases: VAT," adding, "Over the next five years, revenue will increase by 1.7221 trillion won, of which 80%, or 1.3718 trillion won, comes from lowering the credit card VAT credit rate."

The tax credit system allows individual business owners with annual sales under 1 billion won to deduct 1.3% of their credit card sales from VAT. The government proposed a tax law revision starting next year to lower the credit rate to 0.65% for individual business owners with annual sales exceeding 500 million won.

Cha said, "Although it may seem that individual business owners with sales over 500 million won make a lot of profit, that is not the case," explaining, "Convenience stores have average sales exceeding 500 million won. Stores in Seoul have average sales over 700 million won. The same applies to chicken restaurants." He added, "When convenience store or chicken restaurant owners make 500 million won in annual sales, the money they actually take home is 2.1 million won per month." He also mentioned, "When we asked the CU franchisee association, they said a daily sales of 1.5 million won is needed to avoid losses," and "To reach 1.5 million won daily sales, annual sales must exceed 500 million won."

Cha pointed out, "If the tax credit rate is halved as per the government plan, stores with 500 million won in sales will face an annual tax increase of 3.25 million won," questioning, "Is it right to raise taxes on convenience store and chicken restaurant owners who earn 2 million won a month due to a tax revenue shortfall?"

He added, "There are over 84,000 convenience stores and chicken restaurants nationwide, and considering their families, more than 200,000 people will be affected by the tax increase." He also criticized that last year’s plan to lower the tax credit rate to 1% targeted 2027 and that classifying individual business owners with sales under 1 billion won as small-scale businesses contradicts this.

Choi Sangmok, Deputy Prime Minister and Minister of Economy and Finance, responded, "Although sales exceed 500 million won, in wholesale and retail sectors, the points raised by the member were not fully considered," but added, "Overall statistics show that those with sales over 500 million won account for the top 4.3% in sales." He continued, "Since the meaning of sales varies by industry, specific issues will be discussed in the tax subcommittee reviewing the tax law."

However, Deputy Prime Minister Choi explained regarding the "reduction of the credit card VAT credit rate," "The policy goal of normalizing the tax base through the credit has been achieved, and there was an opinion to abolish it based on an in-depth evaluation." While acknowledging the need for system improvements between industries, this suggests that the policy direction itself should be maintained.