Opinion
[Editorial] Toxic mix
Koreans feeling the pinch due to runaway inflation, heavy taxation
Published : Feb 10, 2022 - 05:31
Updated : Feb 10, 2022 - 06:23
South Koreans have been going through a truly tough period, not only because of the protracted pandemic, but also because of a toxic mix of surging prices, taxes, and social insurance costs.

According to the Korea Economic Research Institute, the average monthly wage of Korean workers rose from 3.105 million won ($2,600) in 2016 to 3.653 million won in 2021, marking a 17.6 percent increase. During the same period, the average amount of earned income tax and social insurance costs skyrocketed by 39.4 percent from 363,000 won to 507,000 won.

In particular, the average rise of earned income tax for Korean workers surged by a whopping 70.6 percent during the cited period.

Especially regrettable is that the government has virtually doubled tax rates for freelancers such as writers, part-time teachers and artists, claiming that the rates have long remained too low.

The swelling taxes and modest wage growth, however, are not the end of the depressing story for Korean workers and households.

Consumer prices also keep shooting up, hitting the real incomes of ordinary Korean households. The country’s consumer prices climbed 3.6 percent on-year in January, topping the 3 percent threshold for four straight months since October last year. It was the first time in almost a decade that the figure stayed over 3 percent for four months in a row.

During the 2016-2021 period, food and nonalcoholic beverages in Korea rose 17.6 percent, marking the eighth-largest increase among the 37 Organization for Economic Cooperation and Development nations. In 2021, the figure rose 5.9 percent, the fifth-biggest jump among OECD members amid deepening concerns about runaway inflation.

Experts warn that rising consumer prices pose a threat to the Korean economy. Chang Yong-sung, a professor of economics at Seoul National University said, “Korea’s consumer price level is more serious than previously thought,” adding that stagflation risks are mounting.

Another burden for Korean households is the continued increase in real estate taxes. In the past five years, housing prices soared and so did the property taxes, despite the multiple real estate policies introduced by the Moon Jae-in administration, amid the widespread public view that Moon’s misguided housing measures backfired.

One troubling fact is that the Moon administration repeatedly -- and falsely -- claimed Korea’s real estate taxes were lower than those of other advanced nations. According to Rep. Yoo Gyeong-joon of the main opposition People Power Party, the proportion of property-related taxes to gross domestic product stood at 3.976 percent in Korea, sharing the top spot with France among the OECD nations as of 2020. When President Moon took office in 2017, Korea ranked eighth.

The mix of rising consumer prices and more burdensome taxations inevitably makes the majority of Koreans feel the pinch, especially at a time when the nation is struggling to cope with the resurgences of COVID-19 that depress business activities.

By contrast, the Moon Jae-in administration is reaping the benefits of its thinly-veiled heavy taxation policy. Last year alone, the government collected over 60 trillion won in extra tax revenue, illustrating the heavy tax burdens imposed on Korean taxpayers.

With the extra money, the government is on a reckless spending spree, channeling funds to massive solar and wind power generation projects, among others.

Given the dire situation, presidential candidates should stop making lavish election pledges that promise to give out more cash, and the government must draw up measures to rein in inflation and fix unfair taxation.

By Korea Herald (khnews@heraldcorp.com)
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