One of the most important social changes that are expected to have influence on social policies of Korea in the 21st century, is the change in population structure. Korea is a nation of fast-aging population in the world. Korea became an aging society in 2000 by the ratio of older people aged 65 or above exceeded 7%. Korea is expected to become an aged society with reference to the ratio of older people above 14% by 2018 and enter into super-aged society with the ratio of older people above 20% by 2026.
Rapid aging population will put upward pressure on government spending while at the same time it will put downward pressure on tax revenue. This may increase the fiscal insustainability. To restore fiscal sustainability, we have to raise the efficiency of the tax system and pro-growth tax reform will be carried out. A pro-growth tax reform implies minimizing the negative effects of the tax system on economic behaviors. There is also scope to raise personal income tax revenue from its current low level by broadening the base to be reduced exemptions for personal income. In the long-run, the role of the consumption taxes and sin taxes would increase additional revenue.
Rapid aging population will put upward pressure on government spending while at the same time it will put downward pressure on tax revenue. This may increase the fiscal insustainability. To restore fiscal sustainability, we have to raise the efficiency of the tax system and pro-growth tax reform will be carried out. A pro-growth tax reform implies minimizing the negative effects of the tax system on economic behaviors. There is also scope to raise personal income tax revenue from its current low level by broadening the base to be reduced exemptions for personal income. In the long-run, the role of the consumption taxes and sin taxes would increase additional revenue.