The Lee Jae-myung administration's first tax reform is expected to increase tax revenues by about 36 trillion won over the next five years. In particular, simply reversing the corporate tax rate lowered by 1 percentage point (p) during the Yoon Suk-yeol administration is projected to generate over 18 trillion won in additional tax revenue. The measure to raise the securities transaction tax rate from the current 0.15% to 0.20% is analyzed to secure about 12 trillion won in revenue. As a result of this tax reform, taxes that high-income earners, small and medium-sized enterprises, and large corporations are required to pay will generally increase.
The Ministry of Economy and Finance announced that following the '2025 Tax Reform Plan' confirmed by the Tax Development Committee on the 31st, tax revenues will increase by a cumulative 35.6 trillion won over the next five years compared to this year. This figure combines an increase of approximately 36.1 trillion won and a decrease of around 5 trillion won.
◇ Half of the total tax revenue increase comes from 'corporate tax'... An additional 11.5 trillion won will be collected from the securities transaction tax
Half of the total tax revenue increase is due to the hike in corporate tax. The effect of the corporate tax revenue increase is estimated at about 18.5 trillion won over five years. This is a result of the decision to restore the corporate tax rate, which was lowered by 1 percentage point across all income brackets starting in 2023. The government calculated the tax revenue figures based on the average corporate reporting results from 2022 to 2024.
Lee Hyeong-il, the first vice minister of the Ministry of Economy and Finance, noted regarding the background of the corporate tax hike, "The decrease in tax revenues over the past three years was influenced by a decline in corporate profits due to economic slowdown, but the cut in corporate tax also had an impact," explaining that "the effective tax burden ratio dropped from 22.1% in 2022 to 17.6% in 2024, weakening the revenue base."
Specifically, the corporate tax is expected to collect an additional 200 billion won in 2026, and 4.6 trillion won from 2027 to 2030. Since corporate taxes are reported and paid based on the previous year's performance, the impact of the corporate tax hike measure on the 2026 results will only become fully apparent starting in 2027. In 2026, the increase will only reflect in the interim payment of the corporate tax on the performance of the first half of the year.
The increase in the securities transaction tax rate and the reform of the education tax system also contributed to the revenue growth. The government decided to raise the rate on the KOSPI market from 0% to 0.05% and on the KOSDAQ market from 0.15% to 0.20%. When combined with the Special Tax for Rural Development, the transaction tax will apply at 0.20% for both KOSPI and KOSDAQ.
Additionally, the government plans to raise the education tax rate for revenue amounts exceeding 1 trillion won in the financial and insurance sectors from 0.5% to 1%. The revenue increase effect over five years is estimated to be approximately 11.5 trillion won and 5.2 trillion won, respectively.
Furthermore, it is expected that the termination of the VAT refund exception for foreign tourists receiving cosmetic medical services and the expansion of inheritance tax payers for donations from for-profit corporations (including the spouses of heirs and direct descendants) will result in an increase of about 900 billion won and 30 billion won in VAT and inheritance/gift taxes, respectively.
◇ The only tax revenue decrease is 5 billion won from income taxes... Taxes on only the poor and middle class will increase
On the other hand, the revenue decrease effect was limited to about 5 billion won in income taxes. The adjustments included in this reform plan, such as expanding the income deductions like credit card limits based on the number of children and tax support for elementary school children's extracurricular academy fees, lead to decreases in revenues. In contrast, the reinstatement of the stock transfer income tax for major shareholders (from a holding amount of 5 billion won or more to 1 billion won or more) will produce revenue increases.
Income tax revenue is expected to increase by approximately 100 billion won in 2026 and then decrease by 200 billion won each year from 2027 to 2029. Since earned income tax is paid based on the income from the previous year, the adjustments to earned income taxes in 2026 will take full effect starting in 2027, while changes to financial income taxes will be immediately applied through withholding in 2026. Given that the income tax relief measures outlined in this tax reform plan will be in place until the end of 2028, it is expected that the revenue reduction effects will mostly disappear by 2030.
As a result, the revenue decrease effect is analyzed to be about 400 billion won for the poor and middle class over five years. Conversely, there is an expectation of an increase in tax revenues of 400 billion won from high-income earners, 6.5 trillion won from small and medium-sized enterprises, and 16.8 trillion won from large corporations.
Examining the pattern of tax revenue effects year by year, it is expected that an additional 26 trillion won in tax revenue will be collected in 2026, followed by an annual increase of 82 trillion won from 2027 to 2029. By 2030, the tax revenue increase effect is analyzed to be 84 trillion won. In addition to the corporate tax, the education tax reform measures will also be applied based on the previous year's performance reports starting in 2027. However, unlike the corporate tax, which is based on corporate profits, the education tax is imposed based on sales.
Compared to the current system in 2025, the tax revenue effect over the next five years, calculated using the 'net amount' method, which measures year-on-year fluctuations instead of the accumulated basis, is reported to show an increase of 8.1672 trillion won.