National Assembly Budget Office held the Grand Debate on the 2020 Tax Reform Proposal on Monday, November 9th, 2 pm at the Member’s Office Conference Hall to seek proper principles and direction of the examination process of the government and assemblyman’s tax reform proposal by the National Assembly.
The opening ceremony consisted of congratulatory remarks by Yoon Huduk. Professor Choi Byungho of Pusan National University hosted the debate.
The first presentation was given by Lim Jaehyun, the head of the Tax and Customs Office for Ministry of Economy and Finance, elaborating on the main characteristics and details of the 2020 tax reform bill including “Recover from the damage caused by COVID-19 and revitalize the economy”, “Promote inclusiveness and reinforce mutual growth and fairness”, and “Rationalize the tax system and create a taxpayer friendly environment.”
Park Myungho, Assistant Chief for Estimates and Tax Analysis Department of NABO delivered the key presentation of the second topic and evaluated that this year's tax law reform was designed focusing on the response to the ripple effect of COVID-19. He also added that finding ways to improve the efficiency of fiscal management is required.
In the debate that followed, the Vice Chair of National Assembly’s Strategy and Finance Committee Koh Yongjin (Democratic Party of Korea), positively evaluated the government’s tax law reform plan. However, he pointed out that a comprehensive review is required for the tax imposed on deemed dividends of excessive retained earnings for corporations where more than 80 percent of shares are held by one shareholder or related parties. He also added that it is necessary to address the issues such as the tax credit for SOC investment funds which benefits the high-income earners.
Yoo Sungkull, the Vice Chairman of National Assembly's Strategy and Finance Committee (People Power Party) expressed his concern about the increase in total revenue compared to the increase in total expenditure which deepens the deficit in the consolidated fiscal balance deficit. He insisted that the tax base range of income and corporate tax is too subdivided, which can lead to market distortion, thus, he called for an improvement. Given the situation where tax expenditure has exceeded the legal limit for three consecutive years, he said that thorough review of the Restriction on Special Taxation Act is necessary.
Yong Hyein (Basic Income Party), Staff Director of the National Assembly's Strategy and Finance Committee, assessed that tax cuts were maintained and expanded overall, although there has been tax increase in certain areas. She also pointed out that a tax increase is necessary, emphasizing that it is important to review the adequacy of the basic tax deduction for stock investments, and introduce regulations for tax avoidance of financial investment gains and sunset clause for the consolidated tax credit for investment.
Professor Jeong Seeun of Chungnam National University evaluated that the extension of the maximum income tax rate, the taxation of virtual asset transaction income, and the strengthening of the housing property tax meet the definition of taxation and expand revenue source. She suggested that consolidating tax credits for investments, imposing a tax on deemed dividends on excess retained earnings, and increasing the simplified taxation threshold could undermine the tax definition thus, require a revision.
Park Hyungsoo, former president of the Korea Institute of Public Finance pointed out that this tax law reform is insufficient in terms of income redistribution and growth promotion. In order to improve the income redistribution of tax, he said the deduction and exemption system should be reduced rather than raising the bar of the highest income tax rate. To improve taxation on financial investments, he said excessive deductions and equity issues on different financial investment taxes should be resolved.
NABO will deliver the results of the Grand Debate on the 2020 Tax Reform to the Strategy and Finance Committee of the National Assembly and the Ministry of Economy and Finance for the tax reform evaluation by the National Assembly.