With the US tax policy of 'rate reducing-base broadening' in the early 1980s being particularly influential, many countries made major structural changes to their tax systems. Reforms have generally been reductions in the income tax rate, tax base broadening, and consumption tax strengthening, etc. During this process, the global economy went through the 2008 global financial crisis, and since then, it has been seeking ways to stimulate the economy and recover financial soundness. To revitalize the economy right after the financial crisis, policies to reduce the tax burden for individuals and companies were implemented by reducing various tax rates including individual income tax and corporate income tax. After 2010, due to the rising financial danger in most countries, policies to increase tax for the high-income bracket, such as personal income tax and value-added tax, were implemented.
Similar trends towards such tax policies are being witnessed in the top five OECD countries of the US, the United Kingdom, Japan, Germany, and France. As for personal income tax, four nations among the top five OECD members, namely the United Kingdom, France, the US, and Japan, raised their personal income tax rate after 2010. As for the value-added tax, four of the countries, excluding the US which doesn't operate a value-added tax system, raised the value-added rate. As for corporate tax, three of the countries, excluding the US and France, cut their corporate tax rate. However, Japan imposed a surtax until 2014 for the recovery of the 2011 earthquake, and France is imposing a surtax on certain brackets with excessive incomes until the end of 2016 to prepare the economic resources for the recovery of financial soundness. Recently, the advanced nations are witnessing their economic recovery. However, Korea's financial base is weakening due to several unstable factors in the global economy: tapering in the US; financial risk and stagnant financial recovery in the EU; and low growth rates in developing countries such as China, etc. Also, the acceleration in the retirement of baby boomers, the ageing population, and the low birth rate are increasing the demand for welfare expenditure. Thus, Korea's financial condition is worsening, raising the need to manage the expected financial risk proactively. Considering that human resources are critical assets to corporate activities in Korea, raises in corporate and personal income tax may trigger economic side-effects such as the drain of high-quality human resources and the hindrance of domestic capital investment. Thus, in March 2013, OECD proposed the need to consider raising the value-added tax rate (10%) in priority, which is lower compared to the OECD average (18%).
Considering that Korea is a small, open economy with a structure that is greatly influenced by external factors, and that tax may have a significant impact on economic activities, future tax policy to secure financial income should be prepared by closely monitoring the tax policy trends of OECD member countries. However, monitoring should not just be a simple comparison with other countries but should result in building an optimal tax structure for Korea by taking into account that the tax policy of each country may be different in terms of tax structure, including the tax rate and tax reduction system. Also, the tax policy of each country reflects the economic and social structure that decides the taxation basis.
Lee Youngsook
Similar trends towards such tax policies are being witnessed in the top five OECD countries of the US, the United Kingdom, Japan, Germany, and France. As for personal income tax, four nations among the top five OECD members, namely the United Kingdom, France, the US, and Japan, raised their personal income tax rate after 2010. As for the value-added tax, four of the countries, excluding the US which doesn't operate a value-added tax system, raised the value-added rate. As for corporate tax, three of the countries, excluding the US and France, cut their corporate tax rate. However, Japan imposed a surtax until 2014 for the recovery of the 2011 earthquake, and France is imposing a surtax on certain brackets with excessive incomes until the end of 2016 to prepare the economic resources for the recovery of financial soundness. Recently, the advanced nations are witnessing their economic recovery. However, Korea's financial base is weakening due to several unstable factors in the global economy: tapering in the US; financial risk and stagnant financial recovery in the EU; and low growth rates in developing countries such as China, etc. Also, the acceleration in the retirement of baby boomers, the ageing population, and the low birth rate are increasing the demand for welfare expenditure. Thus, Korea's financial condition is worsening, raising the need to manage the expected financial risk proactively. Considering that human resources are critical assets to corporate activities in Korea, raises in corporate and personal income tax may trigger economic side-effects such as the drain of high-quality human resources and the hindrance of domestic capital investment. Thus, in March 2013, OECD proposed the need to consider raising the value-added tax rate (10%) in priority, which is lower compared to the OECD average (18%).
Considering that Korea is a small, open economy with a structure that is greatly influenced by external factors, and that tax may have a significant impact on economic activities, future tax policy to secure financial income should be prepared by closely monitoring the tax policy trends of OECD member countries. However, monitoring should not just be a simple comparison with other countries but should result in building an optimal tax structure for Korea by taking into account that the tax policy of each country may be different in terms of tax structure, including the tax rate and tax reduction system. Also, the tax policy of each country reflects the economic and social structure that decides the taxation basis.
Lee Youngsook