Tax Policy Challenges and Proposals for the 22nd National Assembly

Published on June 27, 2024
Published by Estimates & Tax Coordination Division, Estimates & Tax Analysis Department

   Up until now, Korea's tax policy has been assessed to have effectively fulfilled its role in adjusting resource allocation to support efficient fiscal activities and foster economic growth. However, recent shifts in the policy landscape are generating new demands for the role of tax policies. With rising demands for welfare amidst a declining fertility rate and an aging population, it is anticipated that relying solely on economic growth to naturally boost tax revenues, as in the past, will prove challenging due to a diminished potential growth rate caused by compromised economic dynamism. Furthermore, there is growing discourse on the evolving role of tax policy in responding to economic and social changes, including issues like income inequality, the digital economy as a new global agenda item, and addressing climate change prompted by global warming. In light of these developments, identifying tax policy initiatives that can effectively address current economic and social challenges facing society, and establishing a competitive and efficient tax system based on these initiatives, have become more urgent and crucial tasks than ever before.
   This report is intended to serve as a reference document for discussions on legislative tasks within the tax field, coinciding with the inauguration of the 22nd National Assembly. It tried to move away from abstract and ideological debates by incorporating both theoretical insights and empirical evidence on each tax issue. The report outlines the fundamental direction that Korea's tax policy should currently pursue, along with specific tasks for enhancing tax policy based on this direction. The structure of the report is as follows: Chapter 1 provides an introduction. Chapter 2 examines the history of Korean taxation from the inception of the government to the present day, evaluating Korea's tax policy in terms of its role. Chapter 3 explores the fundamental direction of tax policy in the future by analyzing changes in economic and social conditions. Chapter 4 identifies policy improvement tasks for each major tax category under the outlined direction, addressing various issues associated with each task.