Moon administration’s predatory tax grab… normalize by easing the burden

In 2021, the Moon Jae-in administration collected far too much tax. It took in as much as KRW 61.3 trillion more than projected, producing an error rate of 21.7%, the highest on record. In the midst of the COVID crisis, rather than easing the tax burden on the private sector, it excessively collected more taxes. This was a failure of tax policy.

With demand contracting and jobs not increasing, for the government to collect taxes beyond its target amounted to draining vitality from the private economy. It raises doubts as to whether the government had any intention of reducing the tax burden to overcome the crisis, and whether it instead regarded the private sector as a target for plunder.

The taxes that deviated most from revenue estimates and rose sharply were capital gains tax, gift tax, corporate tax, inheritance tax, and comprehensive real estate holding tax. These taxes share a characteristic: the government has effectively imposed them like penalties. In particular, revenue from the comprehensive real estate holding tax was projected at KRW 5.1 trillion, but KRW 6.1 trillion was actually collected, resulting in an excessive tax intake of 16.6%. The error is serious. This was the result of pursuing tax policies that make people feel as though they are being treated like criminals and of recklessly increasing the tax burden. It is hard to find, in advanced democratic societies, a government increasing taxes as if punishing its own citizens. Even now, there should be reflection and an apology for having carried out tax administration that departed from the proper role of taxation.

An attitude that seeks to conceal, rather than acknowledge, that tax policy was wrong only leads to repeated failures in tax administration. In particular, portraying the excess tax collection as though it were merely the result of faulty revenue estimation evades the essence of the problem and covers up the wrongdoing. When some politicians claim that the issue lies with the tax revenue estimates of policy authorities, they are obscuring the real issue.

A tax revenue estimation model is only a model, and it can produce results different from reality. It is not because forecasting power was poor that more taxes were collected and revenues increased. Tax revenues rose because the government’s tax policy was excessive and implemented in an unreasonable, out-of-the-ordinary manner. The problem is not the forecasting model; the problem is a predatory tax policy that squeezes the people.

National tax revenue in 2022 is projected to be around KRW 397 trillion. That is by no means a low figure compared with the previous year. The excessively increased tax burden has not been reduced. By distorting the issue as though large tax revenues were simply the result of flawed revenue estimates, the government has once again come to project enormous national tax revenue. It is regrettable that artificially inflating revenue estimates reveals an intention to collect even more taxes.

The government must recognize that the tax burden it has forcibly increased has departed from equity and fairness. Considering that excessive tax burdens have dampened private-sector vitality, it should make efforts to reduce them. Reversing the sharply increased tax burden means normalizing misguided policy. It is also the path toward integration through fair tax administration and reduced conflict.

The government has presented its 2023 budget bill based on these tax revenues. The Ministry of Health and Welfare’s budget increased by 11.8% from the previous year, surpassing KRW 100 trillion for the first time ever. Once current expenditure starts rising in this way, it does not stop and continues to increase. This becomes a pressure factor that raises the people’s tax burden.

Fortunately, Deputy Prime Minister and Minister of Economy and Finance Choo Kyung-ho has stated that he will reduce national debt over the next five years and pursue sound public finance. The policy direction of establishing fiscal rules is encouraging. If fiscal rules are properly enacted into law and implemented, public finances will be stabilized. Uncertainty over the taxes the people must bear will also be reduced. This, in turn, is likely to lower public resistance to the tax burden and thus contribute to social stability.

When an economic crisis is intensifying in earnest, the tax burden should be lowered. I hope the tax authorities and the National Assembly will break away from policy failure and political failure and move onto the right path of reducing predatory taxation on the people.

Sung-no Choi, President of the Center for Free Enterprise (CFE)

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Original title: 약탈적 세금 걷은 文정부…세부담 낮춰 정상화로

Author: Sung-no Choi

Date: 2022-10-04

Source: https://www.cfe.org/bbs/bbsDetail.php?cid=press&idx=24990