Tax Law Revisions and Breaks to Boost Korean Economy

The government of South Korea has announced that it will revise tax laws to offer benefits and improve the country's various sectors. It hopes to encourage higher domestic consumption, attract tourists to shop in local stores, offer more job opportunities to young people and increase overall employment rate. If this move is successful, there will be an expected/estimated 1.08 trillion won ($924.77 million) boost to the annual tax revenue.

"What we focused on in the tax revision plan was stimulating the economy", says vice finance minister Joo Hyung-hwan during a closed meeting on Monday - before they announced the plan.

One of the revisions is a 5 million won tax cut for small to medium-sized enterprises (SMEs) and 2.5 million won for big corporations every time they hire an employee as regular staff within three years.

The country's officials have also come up with a new definition for SMEs. It has been a known fact that such companies avoid hiring more people, despite needing a bigger workforce, to continue receiving tax exemptions. According to the law, a business is considered small or medium sized based on the number of employees. This is exactly why some owners don't fill in new positions; they want to maintain the status as an SME, resulting to lesser job opportunities.

"So we revised the standard, giving tax exemptions not by the number of employees but by the size of their revenues", comments Joo.

There will also be income tax reduction within three years for younger employees to, hopefully, encourage them to apply at SMEs. According to officials, a 15 to 29-year old worker earning 25 million won each year could save around 500,000 won in three years from the tax break.

The revisions will also benefit tourists and, of course, South Korea's local businesses and tourism industry. With the "de facto" end to MERS, officials hope that more and more holidaymakers will visit the country. And one way to attract higher spending is the plan to provide 10% VAT refund on plastic surgeries obtained at government-registered hospitals. Foreigners can also get immediate refunds for products bought at local stores, though there's no list on the exact items. This means they won't have to go through a long process unlike before.

These aren't the only changes happening. A few others include tax levies on clergies and religious groups as well as flexible individual savings accounts.

While there are people relieved, some are also doubtful. A researcher has commented that additional tax from small businesses and religious organizations won't cover tax deficits. A company spokesperson has also stated that the government should help boost a desirable environment for businesses to hire more employees and put in bigger investments.