Introduction of Inflation-Indexing to Comprehensive Income Tax
Corporate Tax Top Rate to Be Lowered to 21%
Kim Moonsoo, former Minister of Employment and Labor and a presidential primary candidate for the People Power Party, announced on April 30 a tax reduction pledge centered on introducing an inflation-indexing system to comprehensive income tax and the complete abolition of spousal inheritance tax.
In a press release regarding his tax reduction pledge on this day, Kim stated, "I will reduce the actual tax burden on the middle class."
First, he will introduce an inflation-indexing system to comprehensive income tax, which is directly related to the middle class. This will automatically link the tax base and deduction amounts of comprehensive income tax to inflation, thereby reducing the tax burden.
The basic deduction for income tax, as well as deductions for seniors and people with disabilities, will be increased. The basic deduction amount will be raised from the current 1.5 million won to 3 million won. The deduction for seniors aged 70 or older will be increased from 1 million won to 2 million won, and the deduction for people with disabilities will be raised from 2 million won to 3 million won.
To ensure the retirement security of retirees, the threshold for comprehensive taxation of financial income will be raised from 20 million won to 30 million won. This is intended to reduce the tax burden for seniors who have only financial income and no earned income.
He will promote tax reductions on bonuses for salaried workers, aiming to maximize the incentive effect and contribute to wealth building.
The non-taxable limit for the childcare allowance of 200,000 won per month for children under the age of six, which was previously provided regardless of the number of children, will be expanded to 200,000 won per child in proportion to the number of children. In addition, passenger cars with engines of 2,000 cc or less and electric vehicles will be excluded from the list of goods subject to individual consumption tax.
Inheritance tax between spouses will be completely abolished. The current estate tax system will be changed to an inheritance acquisition tax system, and inheritance tax will be restructured into a capital gains tax system. The timing of tax payment will be deferred to the point of corporate disposition, allowing businesses to continue operating. In addition, he announced plans to lower the maximum inheritance tax rate, which is currently 50%?much higher than the OECD average of 26%?to the level of competing countries, and to eliminate the 20% premium for major shareholders, a system unique to Korea. The maximum corporate tax rate will be reduced from the current 24% to 21%.
Kim stated, "This tax reduction pledge is a policy that is absolutely necessary for the middle class, which supports our economy," and added, "I am confident that by normalizing taxes in line with global standards, the middle class will become even stronger."
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