South Korea flags broad tax hikes, affluent might be targeted

SEOUL (Reuters) - South Korea needs to raise taxes broadly on the general population, with the affluent taxed to a greater degree, in order to pay for more jobs and welfare programs, the head of the country’s presidential jobs committee said on Thursday.

“Advanced countries collect around 25 percent of GDP in taxes...this year our tax burden stands at 19.3 percent. This is completely wrong,” said Lee Yong-sup, head of the committee, in a media briefing.

Lee said affluent South Koreans should be required to pay more taxes, although he did not specify the taxes that would be raised first.

It was the first official hint of planned tax hikes by the administration of President Moon Jae-in, a liberal who took office on May 10.

Previous governments have grappled with tax increases but negative public sentiment and a general slowdown in the economy had made it difficult to implement higher taxes.

The government has not addressed how it will fund planned aggressive job increases in the long run - 810,000 in the public sector alone.

Thursday’s press conference was also the first held by the committee to outline policy initiatives planned for the first 100 days of the Moon administration.

An additional budget, expected to be around 10 trillion won ($8.93 billion) and announced next week, is expected to be funded through robust tax revenue, rather than state borrowing via treasury bonds.

The committee said it will also look into penalizing companies that hire irregular workers ‘excessively’ in order to make sure more South Koreans have stable jobs.

For instance, jobs that involve the physical health and safety of workers will be required to be filled with full-time employees. Positions that do not deal with temporary tasks will also require full-time workers, the guidelines from the committee showed on Thursday.

The committee will aim to apply this standard to conglomerates first, rather than small to medium sized businesses as “they can afford to pay more full-time workers,” Lee said in the briefing.

“In the case of conglomerates, they have more than enough capacity to not use temporary workers but they choose to hire them because they can be fired easily or be paid less,” said Lee.

(This story corrects number in paragraph 6 to 810,000, not 81,000)

Reporting by Christine Kim; Editing by Shri Navaratnam