Tax Policy of the Next Government

▽Public Pledge related to Taxes; The president elect Roh, Moo-Hyun announced to solve an unbalance of assets by realizing a standard of land and real estate first of all. Also, he emphasized on strengthening the tax on missing incomes, unlawful income and negative income by saying the balance of self-employed persons and income earners.

It is highly likely to be progressed during his term of office with ‘reform tendency’ of the president elect Roh.

The president elect Roh pledged himself to introduce ‘complete negative system’ imposing a direct tax and inheritance tax when activities of inheritance are approved despite not prescribing in the law, to prevent a bequest of anomalous wealth. It contains the more strengthening contents than the current negative system by type.

In terms of a farmhouse, he announced to reduce the income tax for income earners who have less 30 million won and exempt the tax temporarily for the transfer tax even for one family & two houses. Benefits on the decline of the income tax rate have mostly applied to large companies, and so it will not be reformed.

▽Opinion of experts and the government; The tax experts indicated that the tax reform must be promoted by considering an actuality and comparability.

Lim Ju-yeong, professor of the University of Seoul analyzed, “The public pledge of taxes didn’t seem to contain the sufficient review of tax experts. The tax system must review the financial demand, but it is not sufficient.”

He added, “There are over the half of the total income earners who didn’t pay any tax. If the income tax of the income earners with less 3 million won is reduced, a burden of employees who pay the income tax is high.” tax exemption of transfer taxes for one family & two houses was the issue in a revision of the tax reform measure for next year. Its purpose is to activate agricultural areas. However, it is the key point how ‘one family & two houses’ of city people sets the comparability.

One official of the ministry of finance and economy emphasized, “If we adopt a perfect negative system of the president elect Roh, the tax may be classified according to the determination of the tax official. There must be detailed supplement measures to introduce this system.

Besides, Kim Jeong-su, member of the Democratic Party participated in a drafting process of a tax commitment of the president elect Roh, Moo-Hyun said, “We will execute the tax reform measures made by the current government for next year and we will act out various public pledges.”

Kwang-Hyun Kim Kwang-Am Cheon kkh@donga.com iam@donga.com