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Friday, October 14, 2005

tax incentives for employing spouse

Hankyoreh tells of a tax planning scheme in which the keeper of a small business would be able to reduce taxes by paying wages to family members (usually the wife) who normally work in the establishment without wages. The keeper is able to deduce the wages as expenses, and in the final taxation the combined income of the couple is counted. Paying wages to the spouse would also ease the acquiring of property in the spouses' name, as it'd be easier to explain the source of funds. (But what property, especially real estate, does one acquire with a salary of one million won a month?)

The difference to many Western nations is that the motive to pay wages are not the benefits that wage employment brings (increased pension, sick leave).

Also in Hankyoreh, in an editorial criticizing the Hannara (Grand National) Party's proposal for tax cuts, there are a few bits of noteworthy information. Half of the workers (nodongja) and self-empoyed (chayôngôpcha) do not pay any income tax. Basis for Hankyoreh's criticism is that in such a situation the benefits of the tax cuts would go to earners of high wages and big companies, leaving the ordinary people (sômin/seomin) on the cold. They'd still be paying their share of the indirect taxes.

Hankyoreh makes a good point, especially as the image of the government party (Our Open) has been less seomin-friendly than that of the opposition.

See also the English translation of the editorial.
The GNP's tax cut is clearly something for those of high income and a minority of conglomerates. Half of all laborers and self-employed persons pay no income tax. Reducing income tax largely benefits people in the high-income bracket, more so than the common people. 221 conglomerates with big earnings pay for 62 percent of the country's corporation tax, so if the tax rate on that is lowered it mostly benefits a minority of conglomerates. It is deception on the part of the GNP to say it wants this tax cut so as to "reduce the tax burden for the common people" when the common people would enjoy few benefits.

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