The Ability to Pay Principle and Korean Tax System
Asian Tax Journal Vol. 14 No. 2 (2013), pp. 199-213
Abstract
This study shows from the perspective of the overall tax system, including not only income taxation and consumption taxation, but also property taxation, what must be done in order to realize the ability to pay principles of taxation. The existing Korean comprehensive income tax rate has a structure of a higher marginal tax rate for each higher income brackets and consequently it reduces compliance degree of taxpayer. So it needs to be adjusted. The ability to pay principle is generally for fairness, in this respect speculation income and other general income must be treated with different tax rate schemes. Income Tax rate for transfer gain of real estate must be higher than that for the other kinds of income. And the cut line of applying comprehensive taxation for financial income must be also lowered to the level of yearly minimum living cost of a 4 headed family. Analysis results about corporate income tax burden shows that high－income corporate has a relatively low tax burden. Insofar Korea also better applies structure of multiple tax rate as USA (15－39% tax rate structure). Analysis also shows, corporations of a higher reserve volumes bear a lower tax burden than individuals. So there is a need to introduce a tax for high reserve. VAT exemption allows sometimes regressiveness of taxation, the government can better issue coupons for basic goods and switch tax－exemption system into low－rate system. By applying the higher tax rate for expensive consumption goods the regressiveness of the system can be mitigated. Analysis about the effective tax rate of housing property in foreign countries shows that we need to strengthen the property taxation. Tax burden for capital income was declined too strong in Korea as well as overall in the world in last 20 years driven by economic globalization and it is now the time of turn－around.
Keywords
- ability to pay principles of taxation
- marginal tax rate
- tax rate structure
- flexible tax rate
Related Articles
The Effect of the Differential Tax Rate Structure of Housing Acquisition Tax on Housing Transactions
23(6) 147-170
Problems and Improvements of the Elasticity Tax Rate System under the Local Tax Act
23(5) 9-32
Influences of the Change in Related Tax Benefits on Changes in Household Charitable Contributions Behaviors
21(2) 61-91
Taxes and Determing Type of Convertible Bond Issues
11(1) 363-397
Corporate Tax Reduction and Business Activity
5(2) 27-55