[Tax Focus] One-Third of All Bills Are Restriction of Special Taxation Act... Minimal Pruning in Discussions

Nearly 12 Hours of Marathon Deliberations
Some Issues Deferred to Next Week’s Discussion

The Tax Subcommittee of the National Assembly’s Planning and Finance Committee has begun reviewing the Restriction of Special Taxation Act, which accounts for five out of this year’s fifteen legislative review volumes. While there are areas within the government-submitted bill that require detailed discussion, the subcommittee explained that the government has only submitted provisions with little potential for controversy, making it unlikely that any will be sunsetted. However, there are criticisms that the continued extension of sunset provisions for measures such as the credit card income deduction, which have persisted out of inertia, means the total amount of tax cuts is not being reduced.

On November 20, members of the subcommittee from both the ruling and opposition parties held a marathon meeting from 10 a.m. to 9:40 p.m. to review the Restriction of Special Taxation Act, but were unable to conclude some issues and agreed to continue the discussion in next week’s meeting.

Areas of the Restriction of Special Taxation Act reviewed so far include raising the deduction range and extending the application period for venture investment association contributions, tax credits for the Hometown Love Donation Program, changes to the deduction limit for monthly rent tax credits, the introduction and increase of credit card income deduction items, various savings such as housing subscription, large-sum savings for farmers and fishermen, and youth preferential savings, as well as tax credits for small and medium-sized enterprises, start-ups, employment, and various content industries. However, contentious bills such as the separate taxation of financial income were not addressed due to Democratic Party lawmaker Lee Soyoung’s attendance at the Special Committee on Budget and Accounts, which was led by the ruling party.

On the 11th, at the Tax Subcommittee of the Planning and Finance Committee held at the National Assembly, Vice Chairman Su-Young Park and other members conducted the meeting. This meeting deliberated on partial amendments to the Restriction of Special Taxation Act, the Corporate Tax Act, and the Value-Added Tax Act. February 11, 2025. Photo by Hyunmin Kim

The bills reviewed that day were generally handled through provisional agreements. Park Suyeong, a member of the People Power Party and chair of the Tax Subcommittee, stated, “Nothing has been completely dropped,” adding, “We just agreed to discuss a few more items.” For example, regarding the government’s proposal to add a tax credit for webtoon content production costs to the existing tax credit for video content production costs, some lawmakers suggested, “Considering the size of the industry and exports, shouldn’t we also include the gaming and related industries? Let’s confirm the exact scale and revisit the discussion,” resulting in a postponed decision.

Nevertheless, concerns continue to be raised that excessive tax cuts through the Restriction of Special Taxation Act could have a negative impact on the overall economy. According to the government’s budget proposal, the national tax reduction rate for 2026 is 16.1% (80.5 trillion won). While this is 0.4 percentage points below the legal limit of 16.5%, it is based on the recent three-year rise in the national tax reduction rate and the tax revenue outlook for next year, rather than on the results of tax expenditure restructuring, and thus does not contribute to fiscal stability. Some argue that the law itself should be amended for measures like the credit card income deduction, which is extended every year. The credit card income deduction has been extended every single year since its introduction in 1999, for 26 consecutive years. One member of the Tax Subcommittee explained, “It is difficult to eliminate provisions of the Restriction of Special Taxation Act that benefit low-income individuals, people with disabilities, and small and medium-sized enterprises.”

This content was produced with the assistance of AI translation services.