Top 10% Earners Receive Over Half of Insurance and Education Tax Deductions

A government analysis has revealed that higher-income earners bear a heavier tax burden, which in turn leads to greater tax expenditure benefits.

In particular, benefits such as deductions for insurance premiums, pension accounts, and education expenses were concentrated more than half in the top 10 percent income bracket.

The Ministry of Economy and Finance announced today (August 21) that it submitted the tax expenditure settlement report to the National Assembly on the 18th for the first time this year, following the amendment to the Restriction of Special Taxation Act.

According to the Ministry of Economy and Finance, national tax exemptions last year amounted to 76.1 trillion won, an increase of 5.6 trillion won from the previous year driven by increases in tax credits for research and human resources development, integrated investment tax credits, and integrated employment tax credits.

The national tax exemption rate was tallied at 15.9%, which is 0.1 percentage points lower than the 16.0% forecasted last year.

This level exceeds the legal limit for the national tax exemption rate (15.5%) by 0.4 percentage points.

However, the government projected that this year's national tax exemptions will reach 80.5 trillion won with a tax exemption rate of 16.1%, complying with the legal limit (16.4%).

The government also attempted for the first time an analysis of the incidence of major tax expenditures by income bracket, such as in the income tax sector.

This method integrated both comprehensive income earners and wage earners.

The analysis showed that higher-income earners (higher deciles) had high rates of incidence for both major tax expenditures and determined tax amounts.

In short, higher-income earners tend to shoulder greater tax burdens and consequently receive larger tax expenditure benefits.

The top 10 percent income bracket accounted for 77.6% of the total determined tax amount.

They accounted for 34.7% of major tax expenditures.

In particular, the incidence in the top 10 percent bracket was high for insurance premium deductions (51.5%), pension account deductions (52.1%), and education expense deductions (50.4%).

On the other hand, the Earned Income Tax Credit (EITC) and income tax reductions for young workers at small and medium-sized enterprises were mainly concentrated in the bottom 70 percent brackets (decile 7 and below).

The Earned Income Tax Credit showed an incidence of 18.5% in the 7th decile, followed by the 6th decile (13.7%), 5th decile (18.3%), 4th decile (13.1%), and 3rd decile (16.9%).

The 2nd and 1st deciles accounted for 9.8% and 9.6%, respectively.
※ Please note: This article was translated by AI and may contain errors.