The government reported that the total amount of tax deductions for research and development (R&D) expenses and earned income tax credits reached 76.1 trillion won last year. This figure indicates that the national tax reduction rate exceeded the legal limit by 0.4 percentage points.
On August 18, the government submitted its first tax expenditure report to the National Assembly, in accordance with the revised Tax Expenditure Limitation Act.
According to the Ministry of Finance, the national tax reduction amount increased by 5.6 trillion won compared to the previous year, totaling 76.1 trillion won. This rise is attributed to increases in R&D tax credits, integrated investment tax credits, and integrated employment tax credits.
The highest deduction category was special income deductions and special tax credits for insurance premiums, amounting to 7.253 trillion won. This was followed by pension insurance deductions at 4.7581 trillion won, earned income tax credits at 4.6367 trillion won, and income deductions for credit card usage at 4.3243 trillion won.
The national tax reduction rate was adjusted down by 0.1 percentage points from the previous estimate of 16.0% to 15.9%. Last year, it exceeded the legal limit of 15.5% by 0.4 percentage points, but the government anticipates compliance with the legal limit this year.
The report analyzed 11 major tax expenditure systems in the income tax sector, examining the distribution of tax expenditures by income bracket and tax burden. The analysis revealed that higher-income individuals had a greater share of major tax expenditures and determined tax amounts. Additionally, the proportion of high-income earners was found to be higher in determined tax amounts than in tax expenditures.
Insurance premium deductions, pension account deductions, and education expense deductions were predominantly attributed to the top income bracket. In contrast, earned income tax credits and income tax reductions for small and medium-sized enterprise employees were primarily attributed to those in the lower income brackets.
* This article has been translated by AI.
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