IDEAS home Printed from https://ideas.repec.org/a/taf/apeclt/v16y2009i7p683-687.html

What makes the income tax system so progressive? - the case of Korea

Author

Listed:
  • Byung-In Lim
  • Jin Kwon Hyun

Abstract

We analyse the impact of each component of Korea's income tax system, which includes tax rates, allowance, deduction and tax credit, on overall level of progressivity, using micro-level data in 1991, 1996 and 2000. We find that Korea's income tax system has a surprisingly high level of gap between economic income and taxable income, due to remarkably generous levels of allowance and deduction. These have made nearly half of total taxpayers, specifically 47% in 2000, to pay no taxes effectively. Having analysed the impact of each component of Korea's income tax system on overall progressivity, we find that deduction policy has more impact on progressivity than tax rates and allowance. We highlight that tax credit has played an opposite role in determining the level of progressivity, which is regressive. Our recommendation is that decision makers in Korea should pay more attention to tax credit to increase the progressivity of the income tax system.

Suggested Citation

  • Byung-In Lim & Jin Kwon Hyun, 2009. "What makes the income tax system so progressive? - the case of Korea," Applied Economics Letters, Taylor & Francis Journals, vol. 16(7), pages 683-687.
    • Handle: RePEc:taf:apeclt:v:16:y:2009:i:7:p:683-687
    DOI: 10.1080/13504850601131644
    as

    Download full text from publisher

    File URL: http://www.informaworld.com/openurl?genre=article&doi=10.1080/13504850601131644&magic=repec&7C&7C8674ECAB8BB840C6AD35DC6213A474B5
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1080/13504850601131644?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to

    for a different version of it.

    References listed on IDEAS

    as
    1. Kakwani, Nanok C, 1977. "Measurement of Tax Progressivity: An International Comparison," Economic Journal, Royal Economic Society, vol. 87(345), pages 71-80, March.
    2. Jean-Yves Duclos & Martin Tabi, 1996. "The Measurement of Progressivity, with an Application to Canada," Canadian Journal of Economics, Canadian Economics Association, vol. 29(s1), pages 165-170, April.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Li, Yali & Marquez, Ronald & Xie, Luhua & Li, Xinyi, 2025. "Evaluating the impact of special additional deductions policy on urban-rural household vulnerability: Insights from China Family Panel Studies," Economic Analysis and Policy, Elsevier, vol. 86(C), pages 839-857.
    2. Knapp, David & Lopez Garcia, Italo & Kumar, Krishna & Lee, Jinkook & Won, Jongwook, 2021. "A dynamic behavioral model of Korean saving, work, and benefit claiming decisions," The Journal of the Economics of Ageing, Elsevier, vol. 20(C).

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Gabriela Inchauste & Nora Lustig & Mashekwa Maboshe & Catriona Purfield & Ingrid Woolard, 2015. "Distributional Impact of Fiscal Policy in South Africa," Commitment to Equity (CEQ) Working Paper Series 29, Tulane University, Department of Economics.
    2. Gabriela Inchauste & Nora Lustig & Mashekwa Maboshe & Catriona Purfield & Ingrid Woolard, 2015. "Distributional Impact of Fiscal Policy in South Africa," Commitment to Equity (CEQ) Working Paper Series 1329, Tulane University, Department of Economics.
    3. Luis A. Hierro & Rosario Gómez‐Álvarez & Pedro Atienza, 2014. "A Consistent Decomposition Of The Redistributive, Vertical, And Horizontal Effects Of Health Care Finance By Factor Components," Health Economics, John Wiley & Sons, Ltd., vol. 23(1), pages 117-121, January.
    4. van Doorslaer, Eddy & Wagstaff, Adam & van der Burg, Hattem & Christiansen, Terkel & Citoni, Guido & Di Biase, Rita & Gerdtham, Ulf-G. & Gerfin, Mike & Gross, Lorna & Hakinnen, Unto, 1999. "The redistributive effect of health care finance in twelve OECD countries," Journal of Health Economics, Elsevier, vol. 18(3), pages 291-313, June.
    5. B. Essama‐Nssah & Peter J. Lambert, 2009. "Measuring Pro‐Poorness: A Unifying Approach With New Results," Review of Income and Wealth, International Association for Research in Income and Wealth, vol. 55(3), pages 752-778, September.
    6. Onrubia Fernández, Jorge & Picos, Fidel & Rodado, María del Carmen, 2019. "Shifting tax burden to top income earners: What is the best way to reduce inequality?," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy, vol. 13, pages 1-31.
    7. Zeynep Gizem Can & Cathal O’Donoghue & Denisa M Sologon & Darius Smith & Una Murray, 2025. "Modelling the Distributional Effects of the Cost-of-Living Crisis in Turkey and the South Caucasus: A Microsimulation Analysis," International Journal of Microsimulation, International Microsimulation Association, vol. 18(3), pages 26-49.
    8. Nicolas Herault & Stephen P. Jenkins, 2021. "Redistributive effect and the progressivity of taxes and benefits: evidence for the UK, 1977–2018," Working Papers 592, ECINEQ, Society for the Study of Economic Inequality.
    9. Bertrand Laporte & Celine de Quatrebarbes & Yannick Bouterige, 2022. "Tax design and rent sharing in mining sector: Evidence from African gold‐producing countries," Journal of International Development, John Wiley & Sons, Ltd., vol. 34(6), pages 1176-1196, August.
    10. Tavares, Lara Patrício & Zantomio, Francesca, 2017. "Inequity in healthcare use among older people after 2008: The case of southern European countries," Health Policy, Elsevier, vol. 121(10), pages 1063-1071.
    11. Aksman, Ewa, . "Wpływ podatku dochodowego od osób fizycznych w Polsce na dobrobyt społeczny," Gospodarka Narodowa-The Polish Journal of Economics, Szkoła Główna Handlowa w Warszawie / SGH Warsaw School of Economics, vol. 2008(1-2).
    12. Chakravarty, Satya R. & Sarkar, Palash, 2022. "A synthesis of local and effective tax progressivity measurement," MPRA Paper 115180, University Library of Munich, Germany.
    13. Christos Koutsampelas & Panos Tsakloglou, 2011. "Short-run distributional effects of public education in Greece," University of Cyprus Working Papers in Economics 12-2011, University of Cyprus Department of Economics.
    14. Dissou, Yazid & Siddiqui, Muhammad Shahid, 2014. "Can carbon taxes be progressive?," Energy Economics, Elsevier, vol. 42(C), pages 88-100.
    15. Giovanna Messina & Marco Savegnago, 2015. "Le imposte sulla prima casa in Italia, un equilibrio difficile fra decentramento e redistribuzione," ECONOMIA PUBBLICA, FrancoAngeli Editore, vol. 2015(3), pages 5-29.
    16. Michal Horvath & Matus Senaj & Zuzana Siebertova & Norbert Svarda, 2015. "The End of the Flat Tax Experiment in Slovakia," Discussion Papers 15/12, Department of Economics, University of York.
    17. John Bishop & K. Chow & John Formby & Chih-Chin Ho, 1997. "Did Tax Reform Reduce Actual US Progressivity? Evidence from the Taxpayer Compliance Measurement Program," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 4(2), pages 177-197, May.
    18. Paci, Pierella & Sasin, Martin J. & Verbeek, Jos, 2004. "Economic growth, income distribution, and poverty in Poland during transition," Policy Research Working Paper Series 3467, The World Bank.
    19. Adam Wagstaff & Magnus Lindelow, 2007. "Progressivity in the financing of decentralized government health programs: a decomposition," Health Economics, John Wiley & Sons, Ltd., vol. 16(11), pages 1271-1275.
    20. Guy Gilbert & Alain Guengant, 2004. "Évaluation de la performance péréquatrice des concours financiers de l'État aux communes," Économie et Statistique, Programme National Persée, vol. 373(1), pages 81-108.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:taf:apeclt:v:16:y:2009:i:7:p:683-687. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Chris Longhurst (email available below). General contact details of provider: http://www.tandfonline.com/RAEL20 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.