The Ministry of Economy and Finance said on the 21st that last year the top 10% of earners in Korea bore 77.6% of the income tax. At the same time, it was also analyzed that high-income households took more than half of the government's deductions for insurance premiums and education expenses.
That day, the ministry said it submitted the "tax expenditure settlement report" to the National Assembly for the first time. The tax expenditure settlement report is a report containing the previous year's tax expenditure results and analysis. Until now, the government had submitted only the "tax expenditure budget," which lists plans for future tax breaks. With the revision of the Act on Restriction on Special Cases Concerning Taxation last year, the tax expenditure settlement report is also being submitted starting this year.
To check whether the tax break system is achieving its policy goals, the government analyzed the incidence of tax expenditure and the tax burden for income tax by income decile. According to the analysis, the top decile (top 10%) accounted for 77.6% of the finalized tax amount. That means they shoulder a large share of the tax burden.
Next, the ninth decile (top 20%) accounted for 11.6%. From the next deciles, the share was in the single digits, and from the fifth decile it was in the 0% range. The first decile was 0.001%. The tax burden is minimal. This can also be interpreted to mean that the taxes they originally owe are not large, and most of even that is reduced.
Last year's national tax reductions totaled 76.1 trillion won. That was up 8% (5.5913 trillion won) from the previous year. The ratio of tax savings—the share of taxes the government cuts for corporations and individuals out of the taxes it should collect in a year—was 15.9%, 0.4 percentage points above the statutory limit (15.5%). The statutory limit was not observed for the third straight year.
The largest reduction was the insurance premium deduction, which totaled 7.253 trillion won last year. Of that, 51.5% went to the top income decile. The No. 2 item, the pension insurance premium deduction (4.7581 trillion won), also saw high-income households take 46.1%. For the No. 3 item, the earned income tax credit deduction (4.6367 trillion won), the third to seventh deciles received the most. For the No. 4 item, the credit card deduction (4.3243 trillion won), the top decile accounted for 31.2%.
High-income households accounted for more than half of the pension account deduction (52%) and the education expense deduction (50.4%). They also received 41% of the housing funds deduction. The shares for the medical expense deduction (34.5%) and the child tax credit (31.9%) were also high.
Meanwhile, next year's national tax reductions are projected at 80.5277 trillion won, with the ratio of tax savings at 16.1%.