Highlights and Deliberation Issues of the Revised Tax Act Enforced in 2020
Published on December 31, 2019
Published by Property & Consumption Tax Analysis Division of Estimates & Tax Analysis Department
The National Assembly revised 17 tax-related laws (15 national and 2 local) at three plenary sessions on 10, 23, and 27 of December, 2019. The Taxation Subcommittee of the Strategy and Finance Committee (SFC) reviewed 753 tax bills regarding national tax revisions during 12 rounds of deliberation, and the Legislation and Judiciary Subcommittee of the Public Administration and Security Committee (PASC) reviewed 115 tax bills regarding local tax revisions during three rounds of deliberation. Accordingly, the SFC and PASC approved 18 bills (15 committee alternative bills and 3 government proposals) and 4 legislative (alternative) bills respectively. Of these, 15 national and 2 local tax bills, which had been designated as legislative bills annexed to tax revenue bills, along with four parliamentary bills, whose deliberation by the committees had not been not concluded were designated as legislative bills annexed to tax revenue bills, and automatically referenced to plenary session. Of these 21 tax laws, a resolution on 17 of them was completed through deliberation processes.
An in-depth look at the tax law revision directions indicate that, first and foremost, the government is trying to boost corporate investment as well as household income and consumption by expanding the tax exemption system. Key examples include not only an increase and extension of tax credits for investments in “productivity improvement facilities,” but also an increase and extension of items subject to additional deductions including those for the amount spent on credit cards to pay for newspaper subscription fees, as well as a newly-implemented exemption from the individual consumption tax for those replacing older vehicles with new gasoline models. Adjustments to the taxation system were also included. Increases in the transfer rate of local consumption taxes and the conversion to specific duties for liquor taxation of beer and rice wine illustrate changes in the existing taxation system in terms of tax rates. In addition, mechanisms for strengthening the protection of taxpayers' rights, such as the establishment of the Review Committee for National Tax Appeal as a voting body addressing taxation review requests, were also put in place. Other measures that promote the ease of tax payments were also included, such as the lowering of additional tax reduction rates for under-reporting when filing revised income statements.
Expected tax revenue from the revised tax laws is estimated to be 232.3 billion won in 2020 and a total of 1.4589 trillion won in 2020-2024 (estimated by the National Assembly Budget Office). By revenue item breakdown, the tax revenue changes over the next five years are expected to result in an additional income tax revenue of 149.7 billion won, additional corporate tax revenue of 1.4778 trillion won, and other areas of taxation revenue totalling 127.5 billion won. Changes to corporate tax revenues are due to amendments to items, such as an increase in the rates applied to entertainment expense ceilings in deductible expenses (710.8 billion won).
The 2020 national tax revenue budget, confirmed through deliberations by the National Assembly, is 291.9969 trillion won. This is due to a reduction of 42.2 billion won from the 292.391 trillion won originally submitted by the government to the National Assembly during the deliberation process, including the implementation of a temporary individual consumption tax exemption for admissions to golf courses on Jeju Island and low employment/business presence areas.
Lastly, a total of 72 tax expenditure items were amended in accordance with the revised tax laws. Of these, 61 items were revised to expand tax expenditures (8 new items, 35 expansion and extension items, 18 simple sunset extension items), while 11 items were revised to reduce tax expenditures (1 revoked item, 10 reduction and extension items).