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The Korea Herald (16-08, 2004)
By Sim Sung-tae



Adding further woes to a lengthy economic slump, Korea's per capita tax burden jumped to nearly 4 million won, according to data from the Ministry of Finance and Economy yesterday.
The tax ratio, the percentage of gross domestic product collected as taxes, stood at 25.5 percent (183.7 trillion won) of the nation's GDP estimated at 721.3 trillion won.

When divided by last year's population of 47.92 million, each person paid an average of 3.83 million won in taxes, including social security contributions.

The comparable figures were 21.1 percent (2.20 million won) in 1998, 21.5 percent (2.44 million won) in 1999, 23.6 percent (2.90 million won) in 2000, 24.1 percent (3.16 million won) in 2001, and 24.4 percent (3.51 million won) in 2002.

The ministry attributed the surge in the tax burden to rising social security contributions and interest costs related to bond issues.



The government issued more bonds last year to pay its public debt and stabilize the currency, while raising the rates for some social security contributions to meet future payments.

Social security contributions have risen steadily in recent years from 19.6 trillion won in 2000, to 35.9 trillion won last year.

The higher tax load was especially untimely for the Korean economy, as consumers are already grappling with debt created by a nationwide credit bubble. The higher taxes combined to stunt private spending that has been a drag on economic growth.

Korea's per capita tax burden could continue to rise in the future as the nation is quickly becoming an aged society with an extremely low birth rate, analysts warned.

"To simply put it, we will have fewer young people to pay taxes and more old people receiving public benefits. This is a big headache for the nation's fiscal management could lead to higher taxes," said Chung Moon-keun, head of the economic trends department at Samsung Economic Research Institute.

Korea was defined as an "aging society" in 1999 as people aged 65 and older exceeded 7 percent of the population. The nation is expected to become an "aged society" in 2022 when the percentage reaches 14 percent.

(saintsim@heraldm.com)