Democratic Party of Korea lawmaker Kim Young-hwan [provided by lawmaker's office]
Democratic Party of Korea lawmaker Kim Young-hwan [provided by lawmaker's office]

Democratic Party of Korea lawmaker Kim Young-hwan, a member of the National Assembly's Finance and Economy Planning Committee, said Tuesday that the Ministry of Economy and Finance's submission of a tax expenditure settlement report to the National Assembly for the first time in history — on Tuesday, Aug. 18 — marked "a substantive legislative achievement" stemming from an amendment he championed to the Restriction of Special Taxation Act (Article 143-3), which he said he had pushed for through committee questioning and policy proposals over the years.

According to Kim, the submission establishes for the first time an institutional framework allowing lawmakers to conduct rigorous reviews of the previous year's settlement and the following year's budget based on finalized tax filing and payment data. Previously, he said, tax expenditure reports had been compiled solely around forward-looking estimates, leaving post-hoc performance analysis and verification inadequate.

Tax expenditures — including tax exemptions, deductions and income deductions — have long been used as tools to achieve specific policy goals. Critics say, however, that they have operated with less parliamentary oversight and transparency than direct fiscal spending, earning the label of "hidden subsidies." There have also been persistent criticisms that, under a progressive tax rate structure, the benefits of income and tax deductions are concentrated among high earners, deepening inequality contrary to the original intent of such measures.

Kim had strongly called for the settlement report to include a mandatory analysis of how tax benefits are distributed across income brackets.

Individuals earning up to 89 million won ($64,500) in annual employment income are generally classified as middle- or low-income earners. That group accounted for 67.5 percent of all taxpayers in 2024 and 69.0 percent in 2025, meaning the vast majority of the population falls into this category. Determining how much of the government's tax relief actually reaches middle- and low-income earners is therefore central to verifying tax equity — and is the core purpose for which the tax expenditure settlement system was introduced, Kim said.

Kim's analysis of 11 major income-tax expenditure items in the newly submitted report found a statistically confirmed regressive pattern: the higher the income bracket, the larger the tax relief received, not just the tax liability.

Regarding insurance premium deductions, pension account deductions and education expense deductions, the data showed that benefits were most heavily concentrated in the top income decile — the 10th bracket — confirming in numerical terms the need for a sweeping redesign of the tax expenditure system.

Calculating the distribution of the top 10 tax relief items by income decile, Kim found that the top three deciles (8th through 10th) captured 62.7 percent — 18.25 trillion won — of total relief worth 29.13 trillion won. The highest-income decile alone received 9.98 trillion won, or 34.3 percent of the total, while the bottom three deciles (1st through 3rd) received just 2.12 trillion won, or 7.3 percent, laying bare a stark polarization in the distribution of tax benefits.

"The submission of this tax expenditure settlement report marks an important turning point in national fiscal oversight, in that we can now examine in full detail — through the government's own finalized official statistics — a tax relief system that previously relied on estimates and was difficult to verify after the fact," Kim said.

He added that the government must conduct a comprehensive review of the irrational relief structure to ensure benefits are concentrated on low-income and vulnerable groups who need them most. "We will phase out tax relief programs that are clearly skewed toward high earners and deliver weak redistributive effects, and actively push to shift toward direct fiscal spending approaches with greater real-world effectiveness," he said.

The introduction of the tax expenditure settlement report is also seen as an opportunity to rigorously assess the effectiveness and equity of tax relief programs that had previously fallen into a blind spot.


bigroot@heraldcorp.com