Raising taxes should be a last resort in increasing revenue and be considered only if there is public consensus, South Korea’s top economic policymaker said Wednesday, addressing the roiling debate on funding promised welfare programs.
Speaking to lawmakers on the Strategy and Finance Committee, Choi Kyung-hwan said the priority is still on expanding the country’s taxable base by finding people and companies that do not pay their due taxes.
“I urge both the ruling and opposition parties to find a middle ground on what kind of social welfare the country needs before coming up with ways to pay for such expenditures,” the finance minister told the parliamentary committee.
Choi pointed out that there were considerable differences between political parties as well as ordinary citizens on what the level of welfare coverage should be.
He also cautioned against fallout from raising tax rates.
“Experience has taught us that raising taxes does not lead to more taxes being collected,” the minister said.
Choi’s remarks come as lawmakers, including the new leadership of the ruling Saenuri Party, have publicly addressed the need to raise taxes if the country opts to provide more social welfare demands, most of which were campaign pledges by the Park Geun-hye administration.
Tax hikes being floated include marking up corporate taxes and those levied on the rich. The government has opposed such moves because they could adversely affect the business community and nip economic growth in the long run.
“The government is in the process of meeting pledges on welfare by cutting spending and digging up the underground market whose actors have dodged paying their due,” the policymaker stated.
He said that while critics view the cutting of various tax credits and relief as raising taxes, the government did not share this perception.
On the drop in corporate tax earnings last year, Choi said big companies such as Samsung Electronics and Hyundai Motor Co. struggled at the time, which affected the amount collected.
The official, who doubles as deputy prime minister, defended the latest revision to the income tax rules that raised public furor as people filed year-end tax returns. The new scheme heavily cut tax refunds by eliminating some of the tax break categories. The government said it was designed to have people pay fewer taxes throughout the year and receive a smaller refund at the end of the year.
Choi said a special taskforce will look into all the problems that have cropped up and make any needed changes.
A complete assessment of different earnings brackets will be completed by March so that adjustments can be made, Choi said.
“The plan is to reform the way withholding taxes are collected and to reduce complications involved in filing tax settlements in the future,” the policymaker said. (Yonhap)
