Even Those Earning Over 100 Million Won Pay No Tax... "Hidden High-Income Tax-Exempt Individuals Must Be Addressed First" [Tax System, Time for Change]

1,496 High-Income Earners Pay No Income Tax
Calls Grow for Cap on Tax Credits, but Government Remains Silent

As the government has announced a major overhaul of tax expenditure items (tax deductions and exemptions) set to expire this year, there are growing calls for measures to address so-called "hidden tax-exempt individuals" who pay no taxes despite earning annual salaries exceeding 100 million won. Some argue that, as the government embarks on a sweeping tax increase initiative?including a corporate tax hike?to expand the tax base, it should also scrutinize the overall deduction system.

According to annual data from the National Tax Service's Statistical Yearbook released on July 24, 2025, there were 1,496 high-income tax-exempt individuals in 2023 who earned more than 100 million won in annual salary but paid no income tax. This figure is about 27 times higher than the 53 such individuals recorded in 2013. Their average annual salary was 179.71 million won, and they appear to have reduced their effective tax burden to zero by utilizing various deduction systems.

1,496 individuals earning over 100 million won pay no tax

Some analysts attribute this to the effective neutralization of the comprehensive income deduction limit system since 2014. At a National Assembly forum in April titled "Exploring Rationalization Measures for Wage Income Taxation," Chae Eundong, a research fellow at the Democratic Research Institute, stated, "In 2014, major income deduction items such as education expenses, medical expenses, and donations were largely converted to tax credits, which rendered the system ineffective, and its impact continues to this day." Chae also pointed out, "Rational tax avoidance by high-income earners is undermining the tax compliance motivation of middle- and low-income groups."

To curb excessive tax avoidance by high-income earners, the government introduced the "comprehensive income deduction limit system" in 2013. This system recognizes various deduction items?such as housing funds, credit card spending, and employee stock ownership association contributions?up to a maximum of 25 million won per year. Any amount exceeding this limit is included in the taxable base and is no longer deductible.

However, starting the following year, key deduction items such as education expenses were converted to tax credits. As a result, the number of high-income tax-exempt individuals earning more than 100 million won who paid no income tax by applying both income deductions and tax credits surged from 53 in 2013 to 1,441 in 2014, and has remained at around 1,496 as of 2023. It is understood that a significant portion of these individuals also benefit from the foreign tax credit system, which allows for deductions of income taxes paid abroad.

Calls for introducing a cap on tax credits

Accordingly, there are calls to introduce a "comprehensive tax credit limit system" that would cap tax credits in a manner similar to income deductions. For example, it has been suggested that tax credits should also be subject to a limit, which would include insurance premium deductions, medical expense deductions, and donation deductions. Chae argued that the new system should initially set the limit at 2.5 million won?one-tenth of the 25 million won income deduction cap. According to Chae's analysis, the average special tax credit for individuals earning over 1 billion won annually in 2023 was 6.19 million won.

The government is currently conducting a comprehensive review of the tax expenditure structure, which amounts to 78 trillion won per year. Tax expenditures are policies that reduce tax burdens by exempting (non-taxation) or reducing (deduction) taxes, and various income deductions, tax credits, and preferential tax rates all fall under this category. The government has announced plans to overhaul 65 tax exemption items scheduled to expire at the end of this year. However, revising the cap system for income and tax credits has not yet been brought to the discussion table. The Ministry of Economy and Finance maintains that it would be difficult to review such measures in the current tax law amendment process. The ministry explains that, since income and tax credits are systems that apply broadly to a large number of wage earners, it would be challenging to immediately introduce a cap on tax credits.