The Ministry of Economy and Finance is reviewing opinions regarding the increase of the education tax from the financial sector, including banks, insurance companies, credit card companies, and savings banks. After reviewing the opinions, the Ministry plans to meet with officials from each financial sector for face-to-face discussions within this month. Through discussions, the Ministry intends to hear opinions on the business-specific characteristics of each sector and convey them to the National Assembly. The aim is to confirm how much the burden on specific sectors may increase compared to others when the education tax is applied.
However, the Ministry has maintained its position to implement the existing government proposal, suggesting that the likelihood of the financial sector's opinions being accepted seems low.
According to the financial industry on the 21st, the Ministry plans to finalize discussion dates with practitioners after reviewing opinion letters regarding the education tax increase sent by financial sector associations within this month. Associations such as the Korea Banking Association, the General Insurance Association, the Life Insurance Association, and the Korea Federation of Savings Banks have submitted opinion letters to the Ministry. There are concerns that a significant increase in the education tax could deteriorate corporations' financial health and shift the burden onto subscribers.
A Ministry official said, "We will examine whether certain sectors may suffer relatively greater impacts when the education tax is increased and will listen to industry opinions. For instance, insurance companies must return premiums to subscribers, making soundness management crucial, so the burden of the education tax increase might significantly affect this sector."
On the 31st of last month, the Ministry announced a tax reform plan that includes an increase in the education tax rate imposed on financial companies. Starting next year, financial companies with revenues exceeding 1 trillion won will be subject to a tax rate of 1%, which is an increase of 0.5 percentage points. It is estimated that this will result in an additional annual tax of 1.3 trillion won across the financial sector.
The Ministry plans to finalize the tax reform plan, which includes an increase in the education tax rate, this month and submit it to the Strategy and Finance Committee of the National Assembly next month. The increase in the education tax rate requires legislative amendments, so it must pass through the National Assembly.
It seems unlikely that the financial sector's opinions will be accepted even after this discussion. The Ministry has stated it will adhere to its plan to finalize the proposal unless special circumstances arise. A Ministry official explained, "We have not found any factors that would warrant changing the existing increase proposal," adding, "The intention of this discussion is merely to verify whether the contents of each financial sector's opinion letters are valid."
The financial sector is facing increased burdens with the education tax increase on top of the obligation to share the funding for establishing a bad bank. A bad bank is an institution that purchases and resolves non-performing assets or bonds at a discount. The government plans to secure 400 billion won of the total 800 billion won funding for the bad bank from the financial sector. It is expected that the banking sector will contribute 350 billion won, while the remaining 50 billion won will be borne by the second financial sector.