Government Unveils 2025 Tax Reform Plan

The South Korean government has revealed a comprehensive tax reform plan set to take effect next year, targeting corporations, financial institutions, and retail investors with an estimated annual tax increase of 8.1 trillion won. This move aligns with the Lee Jae-myung administration's expansionary fiscal policy but raises concerns over potential impacts on economic vitality.

Key Changes in the Tax Reform

Under the new plan, corporate tax rates will see a 1 percentage point increase across all brackets, marking the first hike in eight years. Financial institutions with profits exceeding 1 trillion won will face a doubled education tax rate, from 0.5% to 1.0%, while the securities transaction tax will rise from 0.15% to 0.2%. Additionally, the threshold for major shareholders subject to capital gains tax on stocks will be tightened from 5 billion won to 1 billion won.

Projected Tax Revenue and Concerns

The government anticipates an annual tax revenue boost of approximately 8.2 trillion won, with a cumulative effect of 35.6 trillion won over five years. However, critics warn that the increased tax burden, particularly on the corporate sector, could dampen economic growth. Experts like Prof. Oh Moon-sung caution against the potential for decreased tax revenue if the economy worsens.