South Korea To Increase Tax Revenues In The Period To 2013

by Mary Swire, Tax-News.com, Hong Kong

30 September 2009

Whilst releasing the 2010 budget plan, the South Korean Ministry of Strategy and Finance has also released the longer term plan to 2013.

According to the Ministry "the budget plan is aimed both at appropriately responding to economic recovery in the short term and improving growth potential in the mid and long term. To this end, the Korean government carefully planned budget spending in two ways: 1) increasing investment in social welfare to support the working class and in future growth engines, 2) decreasing temporary support offered to weather the crisis, and cutting support given to projects which yield low return on investment or deliver poor performance."

Korea's fiscal deficit is expected by the Ministry to achieve balance between 2013 and 2014, along with national debt standing at less than 40% of GDP.

The Ministry explained that "on the revenue side, the government will pursue a broader tax base and lower tax rates. The current tax exemptions and reductions will be examined from scratch, with less tax benefits offered to high income earners and large corporations, and as much as possible – tax benefits provided to low income earners, farmers, fishermen and SMEs. To raise transparency in taxation, self employed professionals and business persons, and owners of shops where transactions are mainly made by cash, will be specially taken care of. Eco-friendly taxation will be introduced, which will apply high tax rates to high energy consuming products."

"On the expenditure side, temporary expenditures made on the basis of revised or supplementary budgets will be examined thoroughly to be lifted or reduced. To most effectively spend budgets, government investment will mainly be made in old projects which will be completed shortly, and investment in new projects will only be made when resources are available through the restructuring of old projects, or when they are evaluated to be worth the investment on the basis of feasibility and cost analysis. In addition, the government will operate budgets more market friendly by promoting investment by the private sector and outsourcing."

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