As concerns arose that income would increase due to the recovery consumption coupons, leading to higher taxes, the government drew a line, stating it is 'not true.' Even if one receives a consumption coupon worth up to 550,000 won, it means no additional income tax is incurred, as it is fully tax-exempt. Academics have advised that to avoid unnecessary debates, it should be clarified through legal amendments that 'support payments for all citizens are not subject to taxation.'
According to the tax authorities on the 17th, the Ministry of Economy and Finance decided not to impose taxes on the recovery consumption coupons that will be distributed starting next week. A Ministry of Economy and Finance official dismissed the possibility of tax increases, stating that the claim of recouping income taxes after distributing the consumption coupons in the political sphere is 'completely unfounded.'
The idea of taxing consumption coupons began at a National Assembly forum hosted by Democratic Party of Korea lawmaker Min Byung-deok and the Korea Tax Settlement Study Association on the 10th. At this event, lawmaker Min stated that issuing support payments, namely consumption coupons, while recouping them through taxes afterward could ensure fairness. He noted, 'Using the tax system for post-redistribution can implement tax justice.' Fellow lawmakers Kwon Chil-seung, So Byeong-hoon, and Shin Yeong-dae who attended the forum also agreed with this notion.
Five days later, Kim Jeong-jae, the policy chief of the People Power Party, criticized, 'With one hand, they hand out recovery coupons to gain favor, while with the other hand, they are targeting the wallets of the public through structural tax increases.' This revealed that the issue of whether to tax consumption coupons had not been clearly resolved in political circles, but the Ministry of Economy and Finance maintained its stance of not imposing taxes, similar to when emergency disaster relief funds were distributed in 2020.
The root of the current confusion lies in tax laws. Korean tax laws operate on a enumerative system, where only income explicitly listed in the law is considered taxable. This means that, according to the income tax law, taxes are not levied on resources not mentioned, and interpreted mechanically, subsidies like consumption coupons are tax-exempt.
However, some subsidies are included as income and are thus subject to taxation, the employment retention subsidy being a prime example. This system supports employers, who may need to reduce their workforce, by subsidizing some of their labor costs, and it is included in the total revenue of the employer. Therefore, how consumption coupons should be classified among different types of subsidies can affect their tax status.
Professor Kim Woo-cheol of the University of Seoul stated, 'Since there is no mention in the income tax law about how support payments are taxed, people will end up in debates,' adding that 'having a regulation stating that subsidies granted to all citizens by the government are tax-exempt would be the most straightforward solution.'
There are also observations that eliminating the credit card income tax deduction will increase taxes owed. The credit card income tax deduction is a system where anyone who uses a credit card can benefit during the year-end tax settlement, making it a program that most citizens benefit from.
However, this worry is also unlikely to materialize. While it is true that the credit card income tax deduction is only effective until the end of this year, this system has been continuously extended due to the large number of beneficiaries. In this National Assembly, lawmakers from both parties, including Lee Hae-chan of the Democratic Party of Korea and Choi Eun-seok of the People Power Party, have proposed a bill to extend this system for an additional 3 to 5 years. Even if the government eliminates the credit card income tax deduction, there is a significant chance that it will be revived in the National Assembly.
Meanwhile, President Lee Jae-myung has raised expectations for a revision of the income tax law since he mentioned that he would 'protect the wallets of wage earners' during his time as party leader. Adjustments to income tax brackets and increasing the basic exemption from 1.5 million won are representative tax cut measures. A Ministry of Economy and Finance official stated, 'We are preparing a tax law revision plan, but the specifics have not yet been determined.'