Analysis of Difference in Tax Burden by Income Bracket after Changing to Tax Credit from Tax Deduction System
Asian Tax Journal Vol. 17 No. 5 (2016), pp. 175-198
Abstract
This study is intended to analyze the difference in tax burden by income bracket after revision of income tax law from tax deduction to tax credit system, taking effect in 2014. To that end, income bracket of all income earners, among the 5th National Survey of Tax and Benefit(NaSTab) data, was classified into 10 categories and insufficient data was supplemented by statistics yearbook issued by National Tax Service. Viewing the analysis, first, items subject to special deduction was increased from 2007 and particularly, per capita deduction of top 10% almost doubled the average per capital deduction of all income earners, which showed that former tax deduction system was relatively favorable to high－income earners than low－income earners in terms of tax burden because of regressive tax deduction characteristics. Second, according to analysis of difference in tax burden by income bracket, tax burden by revised 2014 law was increased from the 5th grade among 10 categories, which was different from government’s announcement and previous studies, showing that tax burden of the category with annual salary totaled ￦46 mil was increased due to reduced income tax deduction, integrated child tax deduction and application of 12% deduction rate of some items that were changed to tax credit system. Third, the higher the income the greater the tax burden, indicating effective tax rate of higher－income bracket was increased more and accordingly tax burden fairness is expected to improve. Saying in conclusion, change to tax credit system to ease regressive tax burden problem which the tax deduction system had was desirable but overall review of deduction & exemption system seemed not to be sufficient. That is, deduction & exemption system shall be able to incorporate the earnings and spending pattern of the taxpayers and thus it’s recommended to review deduction & exemption system from overall standpoint to incorporate a variety of spending considering the characteristics by deduction, thereby accomplishing the “ability－to－pay principle”.
Keywords
- income tax deduction system
- conversion of tax deduction
- equity of tax burden
- tax deduction system
- work income tax deduction system
Related Articles
Problems of SME Special Tax Reduction System and Solutions －On the Issue of Equity－
17(4) 33-62
Introduction of Territorial System for Taxing Foreign Dividends －Focus on Introduction of Territorial System in UK and Japan－
13(4) 87-124
A study on the reform of foreign tax credit system
6(2) 7-38
The Impact of the Regulations on Foreign Tax Credit on the Tax-Saving Accounts : Focusing on ISA and Retirement Pension Accounts
27(2) 327-358
A Study on the Improvement of the Input Tax Credit System for Rationalizing Taxation on Secondhand Goods Transactions：Focusing on the Cases of Switzerland and Japan
26(6) 9-42