A Study on Review of Effectiveness and Development Plan of Children Additional Income Deduction
Asian Tax Journal Vol. 13 No. 4 (2012), pp. 187-211
Abstract
This research investigates financial incentives to encourage childbirth in tax law, finds out related problems and suggests one of the alternatives. Tax law regulates this incentives as a form of income deduction which is before adopting tax rates and it leads automatically to higher financial incentives to high－income tax payers and lower ones to low－income tax payers. Moreover, there is possibility to lower tax－incentive effects because the more tax－deductible dependents of tax payers' are, the more tax－deductible expenses such as tuition fee and medical expenses are. However, to give more financial incentives to taxpayers who have two or more children, income deduction amount has increased to double since FY2011. Though new tax statement regulates to give more financial support, it still remains in the form of income deduction and is doubted whether it is effective or not. This research designs examples reviewing this problem it could be low－effective and rectifies the real problems from National Tax Statistics. As an alternatives, this paper adopts the tax credit method which has suggested in prior literatures. After using some estimated formula, the results report the same tax saving amount of present regulation adopting tax credit as a method of 140,000 won for 2 children and 280,000won for two more children. If the government employ this paper's results with a real data which it has, it could be expected to make more delicate tax strategies about childbirth.
Keywords
- Children additional income deduction
- childbirth encouragement
- tax credit
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