Hidden in Tax Reform Plan... "Giving 150,000 Won While Extracting 5 Million Won?"

The government's recently announced tax reform plan includes a measure to reduce the value-added tax (VAT) credit benefit for individual business owners' credit card sales starting next year.

Some small business owners are strongly protesting, calling it "effectively a tax hike measure."

According to the government's tax reform plan, the amount deducted from the value-added tax equivalent to 1.3% of the sales received by individual business owners through credit cards will be lowered to 1.2% starting next year.

In addition, the annual deduction limit is set to be lowered from 10 million won to 5 million won.

Some small business owners are pushing back, claiming that their tax burden will increase due to factors such as the reduction of the value-added tax credit limit.

On small business online communities such as "It Hurts Because I'm a Boss," opinions were posted such as "They spread money like crazy and are now collecting it back" and "It's getting harder and harder to do business in South Korea."

Kwak Dae-jung, an aide to the New Reform Party leader who previously served as a convenience store owner, also posted on his Facebook, claiming, "Such deductions are a very desperate issue for small business owners, especially convenience store owners, and nearly 90% of convenience stores nationwide enjoy this benefit."

He directly criticized, "This is why people are saying, 'They hand out 150,000 won in livelihood support funds while extracting 5 million won more in taxes from small business owners.'"

The tax credit benefit targets individual business owners with annual sales of 1 billion won or less, and as of 2024, approximately 2.3 million individual business owners benefited from it.

The government acknowledged that the tax burden for some small business owners will increase, but stated that it did not intend to raise taxes on small business owners.

It explained that the 1.3% deduction rate and 10 million won deduction limit were temporary special exceptions introduced due to the global financial crisis and COVID-19, making this a measure to normalize them.

In addition, an official from the Ministry of Finance and Economy added, "Businesses with annual card sales of about 400 million won or less will not see their tax credit amount exceed 5 million won, so even with the reduction in the limit, there will be almost no change in their tax burden," judging that they account for about 95% of all businesses.

(Reported by Kim Minjeong | Video by Ahn Jun-hyeok | Graphics by Lim Do-hee | Produced by SBS Digital News)

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