Aug. 8 (Bloomberg) -- South Korea plans to tax monks and cosmetic surgery on lips, jaws and ears, as it digs for fresh revenue to cover rising social welfare costs.
The proposed changes would add a 4 percent levy on religious honorariums from 2015 and a 10 percent value-added tax on cosmetic surgeries from next year, the finance ministry said in a statement today in Sejong. The plans would also change tax-deduction rates on spending on medical and education expenses from next year, shifting the burden toward higher-income groups.
The revisions, which the finance ministry said would raise 2.49 trillion won ($2.2 billion) between next year and 2018, underline efforts to boost revenue to meet President Park Geun Hye’s pledge to boost spending on welfare, defense and culture by 135 trillion won by 2017. The changes to medical and education taxation reflect Park’s goal of narrowing a gap between the rich and poor.
“Our fiscal condition is challenging,” Finance Minister Hyun Oh Seok said in a briefing before the announcement. “The government will revise tax exemptions and uncover loopholes in the underground economy to increase revenue rather than make direct tax increases.”
About 4.3 million people, or 28 percent of salaried workers, will see tax increases should the revisions on taxable income take place next year, Kim Nak Hoe, head of the tax department at the ministry, said before the release.
Revenue from the planned tax increases will be far below the 55 trillion won that Park aims to raise over her term to help pay for her 135 trillion won spending plans, said Ahn Chang Nam, a tax professor at Kangnam University.
“Park’s officials are trying so hard to squeeze some more tax out of Koreans without increasing direct tax rates, but look at the numbers - there is no way that Park can come up with that sort of welfare money,” said Ahn.
South Korea aims to balance its budget in 2017, after a deficit of 1.4 percent of gross domestic product last year, according to the finance ministry.
“We agree that monks do have to pay tax to make things fair, but how is this going to be enforced?” Nam Jeon, a Seoul-based monk at Jogye Order of Korean Buddhism, said by phone. “Monks move around temples every few months, and there is no infrastructure to track every one of us down.”
There are about 1,908 plastic-surgery hospitals in the country, according to Korea Doctors and the Korean Hospital Association. The industry earned 23.1 million won in profit per month in 2010, according to Ministry of Health and Welfare data, which covered about 600 hospitals with more than 100 beds and doesn’t include smaller, private clinics where most cosmetic surgery takes place.
The industry won’t “suffer greatly” from the proposed tax increase, said Che Jun, director of the foreign marketing department at BK Plastic Surgery in Seoul.
“People who wish to have plastic surgery will get their treatment no matter what. It’s like smoking cigarettes. Smokers continue to smoke despite price increases,” Che said.
The ministry will submit the proposed tax revisions to parliament by September for approval from lawmakers, according to the statement.
To contact the reporter on this story: Cynthia Kim in Seoul at firstname.lastname@example.org
To contact the editor responsible for this story: Paul Panckhurst at email@example.com