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The government has decided to abolish a provision that denies union members a tax deduction if their parent federation fails to disclose its finances — a rule critics have called a "guilt by association" clause — while keeping the broader union accounting disclosure regime in place. Under the revised system, union members will be eligible for tax deductions as long as their own union fulfills its disclosure obligations, regardless of whether the parent federation participates.
The Ministry of Employment and Labor has drafted an amendment to the enforcement decree of the Income Tax Act incorporating these changes and plans to announce it for public legislative comment as early as next month, according to related ministries.
The Yoon Suk Yeol administration introduced the union accounting disclosure system in 2023 to improve financial transparency in labor unions and foster sound labor-management relations. Its core feature allows members of unions with 1,000 or more members to claim a tax deduction on their union dues during year-end tax settlement, provided the union discloses its financial records.
However, the current system bars union members from receiving the tax deduction if their parent federation has not disclosed its finances — even when the affiliated union itself has done so. Labor groups have long demanded reform, calling the provision a "guilt by association" rule that makes rank-and-file members' rights contingent on decisions made by their federation's leadership.
The government has decided to remove this linkage provision through the decree amendment. Going forward, individual unions that comply with the disclosure requirement will be able to offer their members the tax deduction benefit, irrespective of whether the parent federation has disclosed its own finances.
The accounting disclosure system itself will remain in force. The government said it intends to preserve the regime's original purpose of ensuring financial transparency while eliminating the penalty that affiliated unions and their members face when a parent federation fails to disclose.
Labor groups have directed their criticism primarily at the linkage provision rather than the disclosure system as a whole. Unions affiliated with the two major umbrella federations have been participating in the disclosure system out of consideration for their members' tax benefits, and the participation rate reached 89.1 percent last year.
"We are reorganizing the system in a direction that eliminates the provision linking parent federations and their affiliated unions," a Ministry of Employment and Labor official said. "We plan to announce the amendment to the income tax enforcement decree for legislative comment shortly."
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