Tax reform issues in Korea

Abstract

The relatively simple nature of the tax policy in Korea is changing recently, as widening income gap, unemployment, social expenditures, and decentralization have become important policy issues. In this paper, the tax system in Korea is overviewed, and several important tax reform issues such as economic growth, tax competition, redistribution, tax assignment, and real estate taxes are discussed. The main reform issues are the followings. The tax burden is expected to rise, but the direction of changes in tax mix is not clear since social expenditures can play as important role as direct taxation for redistribution. Taxes related to real estates in Korea are too complicated, and the progressivity is needed to be lessened. The roles of central and local governments with respect to tax policy are not well designed. Redistributive function should be assigned to the central governments, and tax exporting of local governments should be minimized.