Among those subject to comprehensive taxation on financial income who earn more than 20 million won a year from dividends and interest and pay taxes separately, more than half earned less than 50 million won from work. About one-third earned less than 10 million won from work over the year.
People subject to comprehensive taxation on financial income are regarded as high earners and are excluded from various benefits. The second round of people's livelihood recovery consumption coupons, paid excluding the top 10%, is a prime example. In this situation, as it has been confirmed that many of them have no cash flow other than dividends and interest, such as wages and business income, calls are likely to grow for the tax system to be made more realistic.
According to materials the National Tax Service submitted to the office of Choi Eun-seok of the People Power Party, a member of the National Assembly's Strategy and Finance Committee, on the 2nd, 333,560 people reported in 2023 that their total financial income from dividends, interest, and the like exceeded 20 million won. Reporting statistics for 2024 will be compiled at the end of this year, so 2023 is the most recent data.
One in three of them earned less than 10 million won a year from working at a company or doing business. Looking at other income amounts by bracket, excluding financial income—such as earned income and business income—those under 10 million won numbered 101,236. That was more than those who earned at least 100 million won excluding financial income (98,460). Even counting only those under 50 million won, they totaled 181,543, more than half of all those subject to comprehensive taxation on financial income.
A considerable number of people have little income other than dividends and interest, apparently because retirees and others have increased dividend investing to fill income gaps. An asset management firm official said, "Since monthly dividend exchange-traded funds (ETFs) that pay distributions (dividends) every month were launched three years ago, older investors have shown a tendency to prefer related products." Thanks to this, the dividend ETF market grew more than 2.5 times year over year as of the end of 2023 (903.2 billion won → 2.3625 trillion won).
If you earned 20 million won a year through dividends, the money in hand after taxes would be around 1.5 million won per month. But regardless of market growth, because the threshold for comprehensive taxation on financial income is fixed at 20 million won, people who can hardly be seen as high earners are being excluded from various benefits. 4th, 90% of the public received the second round of people's livelihood recovery consumption coupons worth 100,000 won per person, but those subject to comprehensive taxation on financial income were an exception.
Not only welfare-type policies such as the people's livelihood recovery consumption coupons, but they are also excluded from various tax benefits. Enrollment is restricted for individual savings accounts (ISAs), which grant tax exemption on investments such as stocks up to 2 million won (4 million won for low-income type), and comprehensive tax-free savings, which do not tax dividend and interest income. In addition, losing dependent status in the national health insurance system can convert them to regional subscribers, potentially increasing premiums.
In the early 2000s, the threshold for comprehensive taxation on financial income was 40 million won. After the threshold was sharply lowered to 20 million won in 2013, it has remained there to this day. During that time, dividends from corporations listed on the Korea Composite Stock Price Index (KOSPI) increased 2.5 times. According to the Korea Institute of Corporate Governance and Sustainability (KCGS), the total cash dividends of KOSPI-listed corporations were 12.3691 trillion won in 2013, but as of the end of last year this figure reached 30.3 trillion won.
On top of this, with dividend investing spreading like a trend recently, it is also pointed out as a problem that the number of those subject to comprehensive taxation on financial income with little earned income or business income could increase. The number of domestic stock investors grew from 4.81 million in 2013 to 14.23 million last year.
Also, over the past two to three years, as asset management firms rolled out covered call monthly dividend products that secure dividend resources by selling call options—the right to buy shares at a preset price—the distributions themselves have increased. Recently, products have appeared with an annualized distribution rate approaching 20%.
Choi Eun-seok said, "We must urgently resolve the irrationality whereby retirees and the middle class are classified as high earners and excluded from benefits under an anachronistic standard," adding, "Only by adjusting the tax system with comprehensive consideration of financial market conditions and actual income capacity can we ensure fairness and also revitalize the capital market."